Shanghai Fell 3.5%, Hong Kong Drops 2.6%

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

Hong Kong stock indexes fell on the comments made by chairman of Hutchinson Whampoa Li Ka Shing that it was unrealistic to expect the government to rescue the market. The Hong Kong billionaire and widely respected investor observed that in these difficult times it will not be prudent to pursue acquisitions. Rising crude oil prices also put renewed pressure on stocks and benchmark indexes in Hong Kong dropped 2.6% and in Shanghai fell 3.5%.

[R]6:00AM New York, 6:00PM Hong Kong - China’s wholesale price index rises 0.7% in July and soars 9.4% from a year ago.[/R]

Hong Kong stock indexes fell on the comments made by chairman of Hutchinson Whampoa Li Ka Shing that it was unrealistic to expect the government to rescue the market. The Hong Kong billionaire and widely respected investor observed that in these difficult times it will not be prudent to pursue acquisitions. Rising crude oil prices also put renewed pressure on stocks and benchmark indexes in Hong Kong dropped 2.6% and in Shanghai fell 3.5%.

Market Sentiment

In Hong Kong trading Hang Seng Index fell 2.58% or 539.20 to 20,392.06, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, fell 2.35% or 262.66 to 10, 916.50. In Shanghai trading CSI 300 Index shed 3.51% or 88.96 to 2,443.98.

Daily turnover on main board was HK$55.7 billion compared with HK$62.3 billion yesterday.

Wholesale Price Index Rises 0.7% in July

The People’s Bank of China reported on its Web site today that the wholesale price index rose 0.7% from a month ago and gained 9.4% from a year ago. The measure shows the price change of products among companies, including price fluctuation and the consumer price index.

Agricultural products increase 0.3% from a month earlier and 6.8% from a year earlier, while the price of oil products climbed 7% month-on-month and 27.3% on the year.
In addition iron ore prices soared 3.3% on the month and 45% year-on-year and coal prices edged up 6.1% in the month and 53.5% year-on-year.

China’s CPI was measured at 6.3% in July.

China Urged to Expedite the Pricing Mechanism Reform of Energy Products

China Daily reported on its Web site today that economists are lobbying for the government to push forward the energy pricing mechanism reform for energy products as the current distortion of energy prices is adversely impacting on the economy. Market watchers observed that there is need to implement a framework that ultimately links refined fuel prices with production costs. The more energy prices are held down, the more severe the power shortage may become. Ken Peng, an economist from Citigroup said economic activity is likely to be hurt by lack of support power supplies.

Peng observed, “These are the policymakers'' move to correct distortions from price controls that have caused widespread power shortages this summer. Economic activity was most likely hurt by the lack of sufficient power supply in July and August, and it may have further slowed down growth in the third quarter.”

Gainers & Losers

Comments by chairman of Hutchinson Whampoa that it is unrealistic to expect the government to rescue the market dampened market expectations that Beijing will come up with a Rmb 400 billion stimulus package.

Oil refiners dropped after crude oil prices rose to $116 per barrel. Sinopec Corp. fell 3.7% and PetroChina plummeted 2.5%.

Hutchison Whampoa fell 1.3% after its interim profit declined 63%, while Cheung Kong Holdings dropped 2.8% after reporting that profit fell more than forecasted by 35% to HK$12.02 billion.

Tsingtao Brewery Co climbed 4.9% after interim profit gained 41.9%. China Mobile and China Life fell 3.7% and 2.5% respectively. HSBC Holdings slid 2.6% on speculation that the U.S. government will bail out troubled mortgage lenders Fannie Mae and Freddie Mac.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 99.48 or 0.77% to 12,752.21, Hang Seng index in Hong Kong decreased 539.20 or 2.58% closed to 20,392.06. ASX 200 index in Australia decreased 54.30 or 1.10% to close 4,875.20. The KL Composite index in Malaysia decreased 1.78 or 0.17% closed to 1,071.43.

The Kospi Index in South Korea decreased 28.12 or 1.83% to close at 1,512.59, SET index in Thailand closed lower 13.52 or 1.96% to 676.53 and JSE Index in Indonesia increased 18.55 or 0.90% to 2,088.25. The Sensex index in India decreased 434.50 or 2.96% closed to 14,243.73.