China Production Growth Declines; Shippers Rise

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

Stocks in Hong Kong rose but in Shaghai fell after industrial production in China declined in July. The slowest rise in production in the last six months at 14.7%, is still robust despite the factory closures around Bejing during Olympics. China may raise its inflation target to 7% from 5% to maintain economic growth.

[R]6:00AM New York, 6:00PM Hong Kong – China’s industrial production slows in July on rising yen, falling exports to the U.S. and pollution control forced factory closures.[/R]

Stocks in Hong Kong gained as commodity stocks rose after metal prices increased shipping lines surged on a rebound in the ocean freight rate index. The Baltic Dry Index has fallen for the last one month, in every session and managed rebound 1.5% after it had declined 40% from its peak on May 2 at 11,793. The index rose 105.00 or 1.5% to 7,097.

Industrial production in China in July rose at 14.7% after rising at 16% in June. The industrial production declined as the government requested factory closures to curb pollution around Beijing during Olympics and exports to the U.S. decline as yuan appreciated against the dollar.

Market Sentiment

In Hong Kong trading Hang Seng Index increased 0.47% or 99.39 to 21,392.71, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, edged up 1.26% or 140.24 to 11,251.61. In Shanghai trading CSI 300 Index shed 0.05% or 1.16 to 2,443.51.

Daily turnover on main-board was HK$61.1 billion compared with HK$69.3 billion yesterday.

China Urged to Raise Inflation Target to 7%

Xinhua News Agency reported today that the State Information Centre said in a report published on the China Securities Journal yesterday that China should raise its inflation target to 5% and 7% for 2009 and 2010 in order to accommodate policies that are meant to boost economic growth. The People’s Bank of China aims to limit inflation to 4.8% this year.

“For developing nations under enormous pressure of economic growth, an inflation rate between 4% and 8% can be regarded as stable,"" explained the information centre.

The centre also noted that there is a need for China to introduce more “austerity measures”, adding that the government could increase expenditures to cushion from an abrupt slowdown as global financial, oil and grain markets are still in turmoil.

China’s Banks Receive $5.6 billion Deposits in July

The People’s Bank of China reported yesterday that Chinese mainland banks received US$5.6 billion in foreign exchange deposits compared to $11.9 billion the previous month. The data suggests that the speculative money chasing probable yuan appreciation may have declined. Yuan dropped for the second day in a row and fell 0.0384% to

The foreign currency deposits were less than the US$8.3 billion in FDI investment used and US$25.28 billion trade surplus, a development that reflects an outflow of short-term speculative funds due to a rising dollar.

Separately, the central bank also reported that the outstanding amount of broad money supply- cash in circulation and all deposits- was at Rmb 4.46 trillion through July, while narrow money- cash in circulation, including corporate deposits- rose to Rmb1.55 trillion.

Gainers & Losers

Hong Kong stocks rose spurred by commodity stocks after metal and crude oil prices advanced.

Zijin Mining gained 11.7%, Aluminum Corp of China rose 6.8% and Jiangxi Copper climbed 6.7%.

Exporter Li & Fung dropped 7.6% to HK$24.2 after the company reported that first half net profit fell by 18%. Lehman Brothers also slashed its rating on the stock to “equal weight” from “overweight”.

Shipping lines increased after the Baltic Dry Index rebounded from its recent drop of 40% to rise 1.5% yesterday. China Shipping Development spiked 8.3% and China Cosco surged 4%. China Cosco was HSBC upgraded the stock to “overweight” from “neutral”.

Financial stocks slumped on concern over the health of the global economy. China Construction Bank plunged 1.3% and the Industrial and Commercial Bank of China slid 1%.

China Unicom to Spend Rmb100 billion

China Daily online reported today on its Web site that China Unicom reported yesterday that the company will spend Rmb100 to expand its wireless network in 2009 and 2010.

As part of efforts to bridge the gap that currently exists between the telecommunications operator and China Mobile, the company will introduce third generation services and add networks in rural areas.

The report indicated that China Unicom expects to receive a license for 3G services when it completes the acquisition of China Netcom.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 66.25 or 0.51% to 12,956.80, Hang Seng index in Hong Kong increased 99.39 or 0.47% closed to 21,392.71. ASX 200 index in Australia increased 29.50 or 0.60% to close 4,981.10. The KL Composite index in Malaysia decreased 3.10 or 0.28% closed to 1,109.43.

The Kospi Index in South Korea increased 9.47 or 0.61% to close at 1,572.19, SET index in Thailand closed higher 4.00 or 0.57% to 705.60 and JSE Index in Indonesia increased 43.12 or 2.09% to 2,106.64. The Sensex index in India decreased 368.94 or 2.44% closed to 14,724.18.