Shanghai Surges, Bank of East Asia Recovers

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

Stocks in Shanghai rose as China controlled investment arm stepped up its purchase of bank stocks. Bank of East Asia in Hong Kong faced a temporary run after rumors of collapse swept markets. Central bank denied the rumors and added HK$500 million in liquidity and Li Ka-shing purchased its stock.

[R]6:00AM Mew York, 6:00PM Hong Kong - FDI in China soars to $83.5 billion in 2007. Shanghai stocks after China steps up its purchases. Bank of East Asia rose after Central bank added liquidity but faced a run on the bank.

Market Sentiment

In Hong Kong trading Hang Seng Index fell 0.15% or 27.56 to 18,934.43, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, gained 0.33% or 32.50 to 9,764.52.

Central Bank in Hong Kong was forced to pump liquidity of HK$ 500 million in the banking systems after rumors sparked a run on Bank of East Asia. Investors and depositors are nervous after the collapse of AIG and Lehman Brothers in the U.S. Li Ka-shing, expressed his vote of confidence and purchased stock of the bank. The bank’s stocks rebounded to close up 3.4% to HK$26 on a heavy volume of 40.37 million shares.

In Shanghai trading CSI 300 Index advanced 3.96% or 84.68 to 2,223.53 after China through its investment arm stepped up purchase of stocks in banks.

Daily turnover on main-board was HK$52.2 billion compared with HK$59 billion yesterday.

China To Regulate Dairy Product Market

Xinhua News Agency reported today on its Web site that according to the Ministry of Agriculture 29 provincial groups had by yesterday set up special working groups to monitor the dairy product market and stem the delivery of contaminated baby formula.

Some of the provincial governments also mulled providing subsidies for farmers in an effort to reduce the cost of feeding cows.

In particular, the Hebei Province has set Rmb316 million or Rmb200 for each cow as subsidies, while Shanxi Province is considering providing a subsidy of between Rmb10 and Rmb18 per day for each cow to dairy farmers in major milk producing cities and counties.

Also Liaoning Province has set aside Rmb108 million as subsidies for 240,000 cows.

The report observed that the General Administration of Quality Supervision, Inspection and Quarantin said yesterday that a quality check of dairy products that were produced after September 14 had shown no signs of contamination.

China Attracts FDI Worth $83.5 billion in 2007

China Daily reported on its Web site today that the UN noted in the World Investment Report released yesterday that foreign direct investment in China jumped to $83.5 billion, the highest among developing countries.

The UN reported that cross border across the world is expected to decline 10% from last year as the global economies slow down. Global FDI gained 30% to $1,833 billion in 2007.

Foreign investors in China are increasingly targeting services, high-tech industries and high value-added businesses.

The UN regards Brazil, Russia, India, the US and China as the five most attractive destinations for global investors.

Gainers & Losers

Hong Kong stock indexes were flat as cautious U.S. lawmakers asked for more details on the $700 billion bailout plan suggested by the Bush administration. Lawmakers and the U.S. public opinion are very skeptical and is increasingly questioning the scope and size of the plan.

The Bank of East Asia rose 3.4% to HK$26 after denying rumors that its precarious financial standing had prompted a run on deposits. Monetary authorities in Hong Kong also rubbished then speculation and added that it was ready to intervene if the company’s position deteriorated.

However other financial stocks dropped on high interest rates. Wing Lung Bank slid 1.4% and Wing Hang Bank declined 2.5%.

China Life rose 2.5% and Ping An soared 1.2%.

China Railway Group jumped 3.2% after reporting that four of its subsidiaries have won four contracts worth Rmb 2.28 billion.

Chalco dropped 1.8% on news that aluminum prices will remain depressed.

Earnings Review

Yue Yuen Industrial (Holdings) Limited reported sales increase of 21% to US$3.64 billion for the nine months period ending in June and net income surge of 56% to US$438.1 million compared to US$289.598 million a year ago.