HK Stocks Fall 5%, Citic Pacific Plunges

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

Stocks in Hong Kong fell sharply after earnings worries dominated trading. Jinagxi Copper declined 13% after earnings dropped 27% and Huaneng Power fell 8% on a record loss forecast from the company. Citic Pacific plunged 25% after it recorded $2 billion in loss tied to derivatives.

[R]6:00AM New York, 6:00PM Hong Kong - Hong Kong stocks fall on negative earnings forecast. Securities and Futures Commission probes Citic Pacific.[/R]

Stocks in Hong Kong declined on a sell-off sparked by lingering worries over the health of the global economy.

Huaneng Power International and Datang Power issued profit warnings that unnerved the market.

Market Sentiment

In Hong Kong trading Hang Seng Index declined 5.2% or 774.57 to 14,266.60, and the China Enterprises Index of Hong Kong listed mainland, or H shares, shed 7.8% or 566.25 to 6,700.87. In Shanghai trading CSI 300 Index dropped 2.6% or 48.08 to 1,833.32.

Daily turnover on main-board was HK$54.1 billion from HK$50.7 billion yesterday.

Securities and Futures Commission probes Citic

The Securities and Futures Commission reported in a terse statement that it is currently probing Citic Pacific Limited after the bank incurred $2 billion in losses in unauthorized currency trading.

Citic Pacific reportedly said on Monday the board of directors were aware of the company''s exposure to the structured investment contracts tied to Australian currency valued at A$9 billion.

The contracts were used as a hedge for the company''s purchase of iron ore in West Australia, and required the company to buy the Australian currency at a fixed price of 87 cents to a U.S. dollar.

The Australian dollar has since plummeted to 69 cents to a dollar on weak global economic outlook and a sharp fall in metals prices, the primary exports of Australia.

Citic Pacific’s board of directors was alerted of the losses on September 7 but only notified the market a month later.

China to inject $19 billion in Agricultural Bank of China

Xinhua News Agency reported that vice president of Agricultural Bank of China Pan Gongsheng said Central Huijin Investment Ltd.- a unit of China Investment Corp.- will inject US$19 billion or Rmb130 billion in the lender.

Under the transaction, Central Huijin Investment Ltd. and the Ministry of Finance will hold equal stake of 50% each.

Pan added that preparation for the lender''s initial public offering will be finalized in the second half of 2009.

China this week approved the restructuring of the institution ahead of the public offering.

Gainers & Losers

Hong Kong market indices fell 5.2% on negative cues from regional bourses and worries over the earnings outlook from Huaneng Power and Jiangxi Copper.

Citic Pacific declined 24.7% after the Securities and Futures Commission said it is investigating the company for US$2 billion in losses from unsanctioned currency trading.

Huaneng Power International plunged 8.4% after it estimated a record loss in 2008 and Datang Power fell 17.8%.

Jiangxi Copper plummeted 13.3% after third quarter profit fell 26.9%.

PetroChina dipped 8.2% after crude oil prices declined below $70 per barrel ahead of the weekly petroleum report in the U.S. and this week’s emergency meeting of OPEC members. OPEC may lower production target for the rest of the year between 1 and 2 million barrels but weakening global outlook is expected to drag demand lower.

Dah Chong Hong Holdings increased 48% after Citic Pacific said it might sell its 56.7% stake in the company.

Anhui Conch dropped 7.4% after its earnings were lower than market expectations.

China National Building Materials lost 18.5% after Credit Suisse cut its 2008 earnings estimate by 19% and forecasted that earnings will decline 40% in 2009.