China Props Up Financials, Yili Down 10%

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

Stocks in HK and Shanghai rose as financial staged a mild rebound after China stepped up purchase of bank stocks. However, inflation and global slowdown worries persisted in China trading. HK reported second quarter balance of payment surplus of HK$10.3 billion. Yili drops 10% for the second day.

[R]6:00AM New York, 6:00PM Hong Kong - Hong Kong financial stocks rise after Goldman Sachs raised $5 billion for Warren Buffett. Hong Kong reported balance of payment surplus of HK$10.3 billion.[/R]

Hong Kong stock indexes rose following news that Warren Buffet will invest $5 billion in troubled U.S. investment bank Goldman Sachs. The recently converted bank also increased its plan to raise capital to $10 billion from $7.5 billion after the agreement with Buffett.

Market Sentiment

In Hong Kong trading Hang Seng Index gained 0.47% or 89.14 to 18,961.99, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, rose 0.28% or 27.52 to 9,732.02. In Shanghai trading CSI 300 Index edged up 0.72% or 15.38 to 2,138.85.

Daily turnover on main-board was HK$59 billion compared with HK$64.4 billion yesterday.

HK Trade Surplus Tops HK$10 billion in Q2

The Hong Kong reported this week that balance of payment surplus of HK$10.3 billion in the second quarter from HK$55 billion in the first quarter. The surplus is 2.5% of the region’s gross domestic product.

The report notes that of the major balance of payments components there was a current account surplus of HK$ 34.4 billion. There was an increase in visible trade deficit, a gain in invisible trade surplus, continued net outflow of current transfers and an increase in net inflow of external factor income.

China Increases Stake in Three Big Commercial Banks

Xinhua News Agency reported on its Web site today that Central Huijin Investment Co., which is an investment arm of the government, has shored up its investment in the country’s three biggest commercial banks.

The report notes that Huijin has increased shareholdings of 2 million shares for each bank through shares purchase on the Shanghai Stock Exchange.

The investment arm now holds 152.8 billion shares of the CCB (including 2 million A-shares and 152.8 million H-shares) in China Construction bank, which represents an increase to 65.405% of total issued share capital of the bank from 65.4041%.

Also the Industrial and Commercial Bank of China says Huijin now holds 118,008,174,032 shares in the bank after the acquisition, while Bank of China said the government investment arm now has 171,327,404,740 shares in the bank.

Beijing is currently increasing its stake in the financial institutions in order to stabilize the stock market.

Huijin is planning to increase its shareholdings in the three banks on the secondary market within 12 months commencing from the date of the share acquisition.

Gainers & Losers

Hong Kong stock averages traded in positive territory after news that Warren Buffet will invest $5 billion in Goldman Sachs cheered financial stocks. China Life gained 3.1%, HSBC rose 0.3% and ICBC advanced 0.9%. However, the Bank of East Asia fell 6.9% to HK$25.15.

Sinopec Corp. advanced 2.8% and PetroChina edged up 2.5%. China Shenhua Energy slid 1.6% on speculation that contract coal prices were unlikely to rise.

Digital China Holdings Ltd climbed 4.9% on news that it is planning to broaden its service business through acquisitions and plans to list in three to five years.

China Cosco dropped 6.1% after the Baltic Dry Index tumbled 3.4%n yesterday.

The largest listed dairy in China, Yili dropped 9% to 9 yuan but second largest dairy, Bright Dairy & Food Company rose 10% after it parent Shanghai Milk Group purchased 1 million shares at 4 million yuan. China in the few weeks has pulled 7,000 tons of tainted dairy products according to Xinhua News Agency.