Baltic Dry Index Dives, China Shippers Plunge

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

Shanghai and Hong Kong stocks plunged on the worries that exports from the region will decline as the U.S. enters a recession. The shipping freight rate index, Baltic Dry Index plunged 10% to the lowest in five years and dragged ship liners to 15% decline.

[R]6:00AM New York, 6:00PM Hong Kong – Hong Kong and Shanghai Indexes plunged on the economic recession worries.[/R]

Hong Kong stock indices dropped on a sell-off sparked by the decline in U.S. September retail sales. Commodity stocks, shipping lines led the decliners in the Hang Seng Index. Indexes in Shanghai and Hong Kong fell on the global economic slowdown worries and U.S. government’s inability to arrest economy from slipping into a recession.

Stocks of shipping lines plunged as ocean freight charges fell to a five-year low on rising fears that the global economy will slip into a recession. Baltic Dry Index plunged 10.7% to 1,615, a decline of 80% from the peak in May of this year.

Market Sentiment

In Hong Kong trading Hang Seng Index fell 4.8% or 767.78 to 15,230.52, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, plunged 6.72% or 530.67 to 7,363.39. In Shanghai trading CSI 300 Index declined 4.9% or 93.45 to 1,820.90.

Daily turnover on main board stood at HK$64.3 billion from HK$52.2 billion yesterday.

Chinese Steelmakers Urge Vale to Reduce Iron Ore Prices

Bloomberg News reported that the China Iron & Steel Association is urging the world’s largest iron ore miner Cia. Vale do Rio Doce to slash iron ore contract prices as demand falls.

CVRD last month indicated that Asian steelmakers should pay as much paid by European companies for iron ore.

Chinese Firms Q3 Profits Drop

Chinese Consultancy Wind Info reported that of the 23 companies that have announced their third quarter earnings for the period ending September net profits of 14 companies have declined from the previous quarter.

Nine companies had profit growth.

Wind Info noted that all the companies noted that earnings have been affected by soaring raw material costs and declining sales prices.

Steel company Masteel’s third quarter net profit plunged 47.4% to Rmb786 million from the previous quarter on falling steel prices.

Gainers & Losers

Shipping lines fell after Baltic Dry Shipment Index dropped the most in five years. The index has plunged nearly 80% from its high in 11,793 on May 20 to 1,615 on Oct 15. The index plunged on the worries that economic slowdown will lower the demand for ocean freight between Asia and the U.S. and new ships entering the market will increase capacity at a time when the world enters a recession.

China Cosco plunged 11.8% to HK$4.5 China Shipping Development shed 25% to HK$5.89.

Air China edged down 12.8% after reporting in a filing to the Shanghai Stock Exchange that it expects profits to fall in the first three quarters because of high fuel prices, market fluctuations during the Olympic Games, the global financial crisis and the Sichuan earthquake.

Commodity stocks also declined. Aluminum Corp of China Ltd lost 9.3% after Reuters reported that the company will shut 1 million tons of alumina capacity at its Shanding plant on low prices. Jiangxi Copper plunged 12.2%.

China National Building Materials declined 14.8%.

CNOOC dropped 8.9% after oil prices fell the most in more than a year to $72 per barrel and China Oilfield fell 15.9%.