Financials Rally on Bank Earnings

123jump.com Staff
21 Jul, 2008
New York City

Stocks in Hong Kong and Shanghai rallied after three of the five leading banks in the U.S. reported better than expected earnings. Benchmark indexes rose 3% in Shanghai and Hong Kong after media speculation that China Investment Corp may inject capital in HSBC. Four leading brokerage houses reported a surge in profit at the end of the first half according to industry reports. HSBC, ICBC, Bank of Communications and Bank of China closed higher.

[R]5:00AM New York, 7:00PM Hong Kong – Better than expected earnings at leading U.S. banks and talks to capital infusion in HSBC bolstered stocks in Hong Kong and Shanghai.[/R]

Financial stocks in Hong Kong and Shanghai rose after media reports of capital infusion in HSBC from China Investment Corporation the main Chinese foreign investment fund. Lower than expected loss at Citigroup and a drop in crude oil futures prices helped to improve sentiment.

Market Sentiment

In Hong Kong trading Hang Seng Index surged 3.01% or 658.71 at 22,532.90, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, increased 2.76% or 334.93 at 12,458.81. In Shanghai trading CSI 300 Index advanced 3.40% or 95.59 at 2,911.05.

Daily turnover on main-board was HK$69.6 billion compared with HK$59.6 on Friday last week.

China’s Bad Loan Ration Declines

China Banking and Regulatory Commission reported yesterday that the bad loan ratio fell 0.62 percentage points from the beginning of 2008 to 6.1% in the first half ended June 30.

Major commercial bank’s cumulative bad loans also slid by Rmb24.71 billion from the beginning of the year to Rmb1.18 trillion by the end of June.

CBRC chairman Liu Mingkang urged banks to increase their capital adequacy, boost risk prevention and extend financial services to small-sized enterprises and rural industry to assist after frequent natural disasters.

Statistics from CBRC also indicate that loans from China’s financial institutions advanced by 15.2% from a year ago to Rmb 2.7 trillion in the first six months of the year.

China to Monitor Foreign Investment Projects

Xinhua News Agency reported on its Web site today that the National Development and Reform Commission said in a circular on Friday last week it will strengthen the management of foreign investment projects and monitor foreign exchange inflows.

In the first six months of the year, China’s foreign exchange reserve rose 35.7% from a year ago to $1.8 trillion, while foreign direct investment advanced 45.6% to $52.4 billion during the same period.

Strong Earnings at Financial Brokers

The Shanghai Securities News reported yesterday that six major Chinese securities companies had over Rmb1 billion net profit in the first half through June.

Companies such as GF Securities, Guosen Securities, Shenyin Wanguo Securities, Huatai Securities and China Merchants Securities, reported net profits of Rmb1.82 billion, Rmb1.25 billion, Rmb1.13 billion, Rmb1.12 billion and Rmb1.07 billion respectively.

Gainers & Losers

Hong Kong stocks gained on lower-than-forecasted loss by US investment bank Citigroup.

HSBC Holdings increased 4.1% on strong market sentiment, especially after Citigroup’s results, and on news that the lender engaged China’s sovereign wealth fund for a possible investment. ICBC spiked 2.3%, China Construction Bank climbed 2.6%, Bank of Communications surged 2.7% and Bank of China rose 1.8%.

Oil refiner Sinopec Corp edged up 3.3% as oil prices remained below $130 per barrel.

Airlines also increased as well. Air China jumped 2.8%.

Property stocks rallied on reports that property prices fell markedly in the second quarter. Sun Hung Kai Properties surged 5.9%, Hang Lung Properties gained 3% and Cheung Kong Holdings soared 3.6%.

Blue-chip companies also gained due to a generally strong market sentiment. China Mobile rose 2.2% and China Life advanced 5.4%.

Hong Kong Exchanges & Clearing also increased 4.6%, while Anhui Conch shed 6% after Goldman Sachs downgraded the stock to “sell” from “neutral” on expectations that rising energy prices will negatively impact earnings.

Asian Markets Review

Hang Seng index in Hong Kong increased 658.71 or 3.01% closed to 22,532.90. ASX 200 index in Australia increased 171.40 or 3.54% to close 5,011.80. The KL Composite index in Malaysia decreased 1.56 or 0.14% closed to 1,103.48. Financial markets in Japan were closed today.

The Kospi Index in South Korea increased 52.93 or 3.51% to close at 1,562.92, SET index in Thailand closed higher 22.78 or 3.43% to 687.30 and JSE Index in Indonesia increased 53.93 or 2.52% to 2,195.07. The Sensex index in India increased 214.64 or 1.57% to 13,850.04.