HK Surges 4%, Shanghai Down 2.6%

123jump.com Staff
08 Sep, 2008
New York City

Hong Stocks surged 4% but stocks in Shanghai declined 2%. Over the weekend the U.S. government nationalized two troubled mortgage agencies and agreed to inject $200 billion in capital. The seizure widely expected will wipe out stocks holders and left the fate of preferred stock holders undecided. Financial stocks rallied in Hong Kong. Stocks in Shanghai fell as investors worried that the economy in China may slow down further after the Beijing Olympic Games.

[R]6:00AM New York, 6:00PM Hong Kong – Financial stocks in Hong Kong and in Asia rallied after the U.S. bailed out two troubled mortgage agencies. The U.S. bailout, long expected may not stop the housing market declining further.[/R]

Market Sentiment

In Hong Kong trading Hang Seng Index gained 4.32% or 860.99 to 20,794.27, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, soared 4.12% or 440.48 to 11,136.34. In Shanghai trading CSI 300 Index fell 2.61% or 56.91 to 2,126.52.

Daily turnover on main-board was HK$68.4 billion compared with HK$65.3 billion on Friday last week.

The U.S. Nationalizes Fannie, Freddie

The U.S. Treasury together with the Federal Finance Agency, with the support of the U.S. Federal Reserve took over the control of two largest mortgage lenders Freddie Mac and Fannie Mae- financial companies that provide funding for three quarters of the new home mortgages.

Under the new arrangement, the two financial institution’s chief executives will be replaced and the Treasury will provide $200 billion in capital support. By putting the two companies under conservatorship, the Treasury effectively gives management control to the Federal Finance Agency, the regulator. The U.S. Treasury has not injected immediate capital in the companies and will purchase $1 billion of preferred stocks from each of the lender to provide the financial guarantees.

Private Equity Investment Falls 70% to US$410 million in August

Xinhua News Agency reported on its Web site today that China Venture Investment Consulting Group said private equity investment in China declined 70% to US$410 million in August from a year ago. The report also noted that in the first six months of the year 73 companies received private equity investment valued at $5.24 billion.

Gainers & Losers

Hong Kong stock indexes rose on news that the U.S. Treasury has seized control of Freddie Mac and Fannie Mae.

Financial stocks advanced. HSBC soared 5.5%, China Construction Bank advanced 3.3%, ICBC increased 3.7% and the Bank of China spiked 5.5%.

Retailer Li & Fung climbed 10.9% after the company reported that it will sell $500 million worth of new shares to a wholly owned subsidiary of Singapore fund Temasek.

CITIC Resources increased 19% as the company considers spin off its manganese business for an initial public offering in Hong Kong.

Dongfeng Motor Group Co slipped 3% after reporting last week that sales for its passenger cars dropped 6.2% in August from a year ago.