Hong Kong Rate Cut Fails to Lift Sentiment

123jump.com Staff
09 Oct, 2008
New York City

Hong Kong market averages rebounded from sharp declines on Wednesday as financial and realty stocks advanced on interest rate cuts in the region. Gains were limited as the interbank rates remained steady but near its record level, despite a rate cut by Hong Kong and China.

[R]6:00AM New York, 6:00PM Hong Kong- China’s business climate index declined in Q3. Hong Kong interbank lending remained tight despite HKMA lowering rates.[/R]

Hong Kong market averages rebounded from sharp declines yesterday as financial and realty stocks advanced on interest rate cuts in the region. Gains were limited as the interbank rates remained steady but near its record level.

Market Sentiment

In Hong Kong trading Hang Seng Index rose 3.31% or 511.51 to 15,943.24, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, soared 3.90% or 290.73 to 7,743.47. In Shanghai trading CSI 300 Index slid 1.36% or 27.58 to 1,995.30.

Daily turnover on main-board was HK$60.1 billion compared with HK$77.8 billion yesterday.

China’s Business Climate Index Drops to 128.6 in Q3

The National Bureau of Statistics reported on its Web site today that China’s business climate index, a measure of business performance, dropped by 16.1 points to 128.6 points in the third quarter from the comparable period a year earlier.

A figure above 100 points represents progress, while a figure below 100 points shows depression. The index slipped below 130 points for the first time since 2003. Business indices fell in all sectors, except for the service industry.

The business index for listed companies dropped 18.5 points from the second quarter to 145.6 points in the review period.

Medium- and small-sized enterprises fell 12.6 points to 118.5 points and 8.9 points to 111.9 points from a year ago correspondingly.

China Economic Growth 9.7%

The International Monetary Fund reported in its recent publication of the World Economic Outlook that although China’s economic growth is forecasted to slow in the first half of this year from the same period a year ago, the economy will remain vibrant due to increasing investment and moderate consumption.

As a result economic growth is expected to rise to 9.7% in 2008 and 9.3% next year.

IMF projects that growth in Asia’s emerging economies will ease to 8.4% this year and 7.7% next year as demand on the global markets slow due to deteriorating global financial conditions.

It is noted that the inflation risk has begun to slow due to the retreat in oil prices.

Gainers & Losers

Stocks in Hong Kong rebounded from 8.2% plunge yesterday buoyed by interest rate cuts in the region.

However, the Hong Kong Interbank Rate remained steady despite the Hong Kong Monetary Authority slashing its key rate by 100 basis points to 2.3% from 3.3%.

Sinopec Corp, the oil refiner rose 7.4% as oil prices remained below $90 per barrel, while PetroChina jumped 3.1%.

China Communications Services advanced 14.8% after dropping yesterday on worries of a reduced market for its telecommunications infrastructure as Goldman Sachs elevated the stock to its conviction buy list.

Sino Gold climbed 12.2% after prices of the yellow rose to $900 per barrel as investors sought a safe haven from the worsening conditions on the global financial markets.

Financial stocks rose as China slashed its key rate yesterday. ICBC increased 6.6% and the China Construction Bank edged up 4.1%.

Realty stocks also rose as well. China Overseas Land Investment soared 4.5% and China Resources Land edged up 4.2%.

China State Construction International Holdings declined 3.7% after it lowered its capital spending by 19% on the weak credit market environment.