China Rate Cut, Third in Two Months

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

Stocks in Hong Kong and Shanghai edged higher ahead of rate cut expectations. China lowered its rate by 27 basis points for deposits and lending. The third rate cut since Sept 15 by China is expected to stabilize the financial markets and stem the decline economic growth rate.

[R]6:00AM New York, 6:00PM Hong Kong - China suspends margin lending and short selling.

Stocks in Hong Kong rose marginally driven by energy stocks after crude oil prices rebounded to $64.77 per barrel.

Expectations that the Bank of Japan and the U.S. Federal Reserve will lower their key rates also leveraged gains. China lowered the key lending and deposit rate by 27 basis points.

Market Sentiment

In Hong Kong trading Hang Seng Index rose 0.8% or 105.78 to 12,702.07, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, increased 1.8% or 103.65 to 5,786.71. In Shanghai trading CSI 300 Index fell 2.8 or 47.60 to 1,658.22.

Daily turnover on main-board was HK$59.2 billion from HK$66.1 billion yesterday.

China Suspends Margin Lending and Short Selling

South China Morning Post reported that the State Council has decided to suspend the launch of margin lending and short selling in order to prevent conditions from deteriorating in the financial markets.

The report noted that short selling and margin lending could expose lenders to large losses.

CIRC Supports Insurers to Stabilize Stock Markets

The Financial Times reported today that China Insurance Regulatory Commission (CIRC) summoned heads of the country''s largest insurance groups on October 17 and ordered them to play a stabilizing role on the financial markets.

CIRC said in a statement, “The CIRC has always been actively supportive of various measures for stabilizing the capital markets. Insurance institutions should stick to a long-term and value-oriented investment concept, supporting the steady development of the capital markets by making moderate moves.""""

Gainers & Losers

Hong Kong market indices rose led by energy stocks after crude oil prices increased 3.5% to $64.77 per barrel. CNOOC gained 10.8% to HK$5.01.

PetroChina advanced 5.8% and China Coal Energy soared 10 %.

HSBC Holdings declined 4.3% or HK$3.85 to HK$86.15 on profit taking. The bank had had advanced 20% in previous session.

Angang Steel surged 13.9% after its parent company said it will shore up its stake in the company.

China Shenhua Energy edged up 11.6% to HK$11.16 after it reported third quarter profit gained 48% on rising prices and increased throughput. HSBC upgraded its stock to “overweight” from “neutral”.

Bank of China dropped 3.4% ahead of its earnings announcement today.

Tencent gained 11.4% after Goldman Sachs raised its rating on China''s internet and media industry to “attractive” from “neutral”.

Alibaba.com rose 2.7 %.

Earnings Review

Air China reported third quarter loss of Rmb1.94 billion from Rmb2.18 billion in the same period a year earlier on rising fuel costs and difficult conditions in the capital markets.

In the nine months ended September 30 losses topped Rmb657 million from Rmb3.488 billion in the comparable period a year ago.