Hong Kong Down 4.5%, Shanghai Drop 7.4%

123jump.com Staff
18 Nov, 2008
New York City

Stocks in Hong Kong dropped 4.5% and in Shanghai plunged 7.4%. Investors are increasingly factoring longer and deeper economic recession in the Western economies and lower exports from China. Broker comments forced Hong Kong Exchange down 8% and HSBC lower by 4%. Automakers gained on speculation.

[R]6:00AM New York, 6:00PM Hong Kong – Stocks in Hong Kong dropped 4.5% and in Shanghai plunged 7.4%. Investors are increasingly factoring longer and deeper economic recession in the Western economies and lower exports from China.[/R]

In Hong Kong trading Hang Seng Index fell 4.5% or 613.64 to 12,915.89, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, dropped 5.3% or 369.74 to 6,598.35. In Shanghai trading CSI 300 Index plunged 7.4% or 147.41 to 1,839.82.

Daily turnover on main board rose to HK$44.8 billion from HK$39.8 billion yesterday.

BofA to Raise Stake in China Construction Banking

Bloomberg News reported today that U.S. lender Bank of America will spend $7 billion in shoring its stake in China Construction Banking Corp. to 19.13% from 10.8%.

The price is at a 32% premium to yesterday’s closing price of HK$4.11.

Bank of America will purchase shares denominated in Hong Kong dollars at 1.2 times audited book value as of September 30, and pay 2.46 yuan per shares or HK$2.79 per share.

The report notes that the lender will not finance the transaction with the $15 billion facility it received from the Troubled Assets Relief Program managed by US Treasury Department three weeks ago.

Citigroup to Reduce Headcount to 300,000

Citigroup reported yesterday that the bank will reduce the worldwide headcount by 14% to around 300,000 as part of plans to slash its operating expenses by 20%.

At the end of October the bank has reduced the staff by 23,000.

Chief executive Vikram Pandit forecasts that the bank’s annual expenses will fall to US$50 billion in 2009 from US$62 billion this year.

Gainers & Losers

Hong Kong market indices dropped on heightening fears that the global economy will slip into a deep and protracted recession. UK trade group suggested that the recession in country will be longer and deeper than previously estimated.

Japan, Hong Kong, the EU are already in recession and the world’s largest economy U.S. is nearing a recession.

Chinese automakers rose on the speculation that they will receive a package from the government to insulate them from falling demand. Brilliance China Automotive increased 9.8% and Geely Automobile Holdings rose 4.7%.

Bourse operator Hong Kong Exchanges & Clearing declined 7.5% after Morgan Stanley cut its price estimate to HK$38 from HK$75 and estimated lower trading volumes.

HSBC Holdings tumbled 3.6% to HK$79 after Goldman Sachs slashed its target price on the stock to HK$77 from HK$102 and estimated a fall in earnings in consumer loan and credit card unit.

The lender also said it will reduce its headcount in Asia by 500.

China Life dipped 6.8% and China Construction Bank fell 5.6%.

PetroChina slid 3.6% after crude oil prices for December delivery declined 3.5% to $55 per barrel. China Shenhua slipped 6.9% as also metal prices declined.