Shanghai Stocks Plunge 5%

123jump.com Staff
11 Aug, 2008
New York City

Stocks in Shanghai fell 5% and in Hong Kong edged lower as producer price index surges to 10% in July in China. In the morning stocks rose as crude oil prices fell but stocks quickly fell after the release of inflation report. The rising food, energy and raw materials cost dragged market averages lower. Prices of food rose 9% and prices of mined products rose 34% from a year ago. A planned sale of a stake in China Eastern Airlines to Singapore controlled fund to the national carrier fell.

[R]6:00AM New York, 6:00PM Hong Kong - China producer price index rises 10% in July. China Eastern, Singapore Airlines deal collapses.[/R]

Stocks in Hong Kong reversed gains in the morning session after a report from the National Bureau of Statistics showed that the producer price index rose 10% in July, raising fears tighter monetary policy.

Market Sentiment

In Hong Kong trading Hang Seng Index fell 0.12% or 25.87 to 21,859.34, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, slipped 0.83% or 97.26 to 11,645.13. In Shanghai trading CSI 300 Index declined 5.20% or 134.65 to 2,456.81.

Daily turnover on main-board was HK$57.6 billion compared with HK$63.9 billion at mid-day Friday.

China Producer Price Index Surges 10% in July

The National Bureau of Statistics reported today that the producer price index increased 10% from the same period a year earlier, as the purchasing prices for raw materials, fuels and power advanced 15.4%.

PPIs for mining and quarrying industry increased 34.1% year-on-year, while the prices for raw material industry and machining industry and consumer goods rose 14.3%, 7.7% and 4.6% respectively.

Statistics from NBS also showed that the prices for foodstuffs advanced 9.1% and clothing and commodities jumped 2.4% and 4.3% in that order.

During the year, the producer price index for crude oil rose 41.2% on the year as the prices for oil products like gasoline, diesel and kerosene jumped 32.6%, 21.5% and 29.4% correspondingly.

In the six-month period through July the producer price index rose 8% year-on-year, while the purchasing power for raw materials, fuels and power products climbed 11.7%.

China Eastern, Singapore Airlines Deal Collapses

Xinhua News Agency reported on its Web site yesterday that the planned sell of China Eastern Airlines (CEA) stake to Singapore Airlines and Lentor Investments has collapsed.

In September last year Singapore Airlines and Temasek- a state-controlled investment company and parent of Lentor Investment- signed a preliminary deal to buy a 24% stake in China Eastern for US$923 million, or HK$3.80 per share.

The deal was however rejected by China Eastern Airlines shareholders in January, who believed that the offer price was below fair value of the company.

Singapore Airlines maintains that it will not increase the offer price. CEA said in a statement that the company will continue to look for strategic investors so as to improve cooperation and increase the company’s competitiveness on the international market.

Gainers & Losers

Stocks in Hong Kong reversed gains on lower crude oil prices in the morning after the National Bureau of Statistics in China reported that the producer price index rose.

Peace Mark Holdings slumped the most of the traded stocks and fell 42.2% as investors raised concern over the company’s high debt leverage.

Oil producer CNOOC declined 3.2% after crude oil prices traded below $117 per barrel. Coal miners fell on declining oil prices with China Shenhua down 3.8% and Yanzhou Coal lower 4.8%.

Power companies however gained. Huaneng Power jumped 3.9% and China Resources Power increased 8.5%.

China Mobile slumped 1.1% to HK$99.

Li Ning edged up 3.5%, while Esprit Holdings falling 2.5% on a weaker euro. Foxconn International Holdings Ltd climbed 9.5% as revenues in parent Hon Hai Precision Industry rose in July.

Shipping firm China Cosco declined 3.9% as freight charges of raw materials continued to fall.

Zijin Mining slid 4% on falling gold prices.