HK Drops13%; China Life Earnings Fall

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

Hong Kong stocks plunged nearly 13% on the worries that global economic slowdown will drag exports and earnings of the companies in the China region. Banks, shipping and airlines led the decline. China Life, China Vanke, Dongfang Electric and Ping An reported weaker than expected results.

[R]6:00PM New York, 6:00PM Hong Kong - Hong Kong exports increase 3.6% to HK$247.2 billion in September. China Life and Ping An Insurance plunge after earnings.[/R]

Market Sentiment

In Hong Kong trading Hang Seng Index plunged 12.7% or 1,602.54, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, dropped 14% or 812.63 to 4.990.08. In Shanghai trading CSI 300 Index dived 7.12% or 126.93 to 1,654.67.

HK Exports Rise 3.6% to HK$247.2 billion in September

Hong Kong''s Census and Statistics Department reported today that that the value of total exports of goods rose 3.6% from a year earlier to HK$247.2 billion in September and 1.9% from August 2008.

The value of re-exports increased by 4.6% to HK$239.4 billion in September 2008, while domestic exports fell 20% to HK$7.9 billion.

Imports of goods advanced 3.9% year-on-year to HK$263.2 billion in September 2008, yielding a trade deficit of HK$16.0 billion.

In the first nine months of the year, total exports of goods rose by 7.8%, with the value of re-exports rising by 8.6% and domestic exports fell 11.5%. In addition, imports in the three quarters to Septembers gained 9.1%, resulting in a trade deficit of HK$167.3 billion.

Exports to Asia remained unchanged, with shipments to India soaring 63.6%, Vietnam surging 4.5% and Taiwan advancing 4%. Declines were registered in Korea falling 15.4% and mainland China dropping 1.2%.

Increases were also registered in Germany, U.S. and U.K. increasing 21.3%, 7.5% and 7% respectively.

A government spokesman said, “the deepening of the global financial crisis in September has increased markedly the downside risks to the global economy. This coupled with the recent strength of the US dollar does not bode well for the performance of Hong Kong''s exports in the period ahead.”

China Scraps Tax on Interest Income of Investors

Xinhua News Agency reported today that the Ministry of Finance and the State Administration of Taxation said in a joint statement that interest income from securities accounts of individual investors will be not be taxed temporarily.

The new measure applies to interest generated from securities account balances from October 9.

China Adds 9.36 Million Jobs in Q3

The Ministry of Human Resources and Social Security said today China created 9.36 million jobs in the first nine months of the year, while 4.09 million who were retrenched were re-employed.

MOHRSS notes that the country''s registered unemployment rate at the end of September was 4% as 8.3 million were unemployed.

An estimated 215 million workers joined nationwide urban pension system, 274 million were in the basic medical care system, 122 million were in the unemployment insurance mechanism, 135 million were covered by the work injury insurance and 88 million were in maternity insurance.

The ministry also transferred 219,000 labors from Sichuan Province for new jobs elsewhere and 865,000 people were aided by the government to find jobs in their locality.

Gainers & Losers

The Hang Seng earlier plunged 15%, the largest one day drop since 1987.

Financial stocks fell. HSBC declined 14.77% to HK$75.00.

PetroChina declined 15% and Sinopec Corp shed 16.4% after oil prices traded low at $64 per barrel despite the decision by OPEC to cut production by 1.5 million barrels per day.

CNOOC plunged 13% and China Shenhua Energy fell 23.55% after copper prices fell to $1.6955 per ton. Guangzhou R&F Properties dropped 22.4%.

Hong Kong Exchanges & Clearing fell 13.89% on continued losses on the bourse.

Commodity stocks also declined on speculation that demand for raw materials, especially from China, will slow. Aluminum Corp of China Ltd tumbled 12.5% after the company reported quarterly earnings decline of 92%.

Datang International Power shed 19% after reporting yesterday that it forecasts earnings will drop 85% on rising coal costs.

Huaneng Power slid 14.25%.

Earnings Review

Dongfang Electric, the second largest power equipment company reported third quarter profit plunged 60% to 317 million yuan or 0.39 yuan a share. Rising raw materials cost, higher level of subcontracting costs and transportations costs added to total costs. Sales increased 11% to 7.05 billion yuan from a year ago. Dongfang Electric plunge 37.2% or 6.50 yuan to 11 yuan on 1.6 milion shares trading volume.

China Vanke, the largest real estate developer in China reported third quarter net income dropped 13.4% to 215 million yuan on sales decline of 32% to 11.5 billion. The company in a statement to the local exchange suggested that full-year profit is likely to decline and global financial markets uncertainty has made it difficult to forecast full year earnings.

China Life Insurance, the largest insurance company reported third quarter net income fell 70% to 2.34 billion or $342 million or 8 yuan cents.

Third quarter premium income surged 81% to 65.7 billion yuan.

Investment income in the quarter plunged 44% to 11.1 billion yuan and in the first half rose 5.1% to 25.3 billion yuan. The investment portfolio has nearly 60% in bonds.

China Life plunged 14% or 2.70 yuan to 16.70 yuan.

Ping An Insurance Group Company, the second largest insurance company in China reported third quarter loss of 7.8 billion yuan or $1.1 billion compared to a profit of 3.6 billion yuan or $500 million a year ago.

Insurance premium collected surged 37% to 29.1 billion yuan and net investment income fell 81% to 3.1 billion yuan or $470 million.

The ill-timed purchase of 4.9% stake in Dutch-Belgian banking group Fortis in November last year for 1.81 billion euros dragged investment income. Fortis was bailed out by the governments of Belgium, Luxembourg and Holland and its stocks has lost nearly 94% of its value in the year.

Ping An dropped 14.5% or 4.10 yuan to 24 yuan.