Hong Kong Rebounds, China Stimulus

Darlington Musarurwa
25 Nov, 2008
New York City

Stocks in Hong Kong surged on the second rescue package for Citigroup. World Bank lowered its annual economic growth target for China to 7.5%. China is considering investing as much as 10% of total market capitalization in local markets.

[R]6:00AM New York, 6:00PM Hong Kong – Stocks in Hong Kong surged on the second rescue package for Citigroup. World Bank lowered its annual economic growth target for China to 7.5%. China is considering investing as much as 10% of total market capitalization in local markets.[/R]

Hong Kong stock indexes increased 3.4% buoyed by increases in the region after commodity prices soared after U.S. offered second rescue package to Citigroup. The U.S. lawmakers and regulators have underestimated the depth of the current financial markets crisis and appear to be fighting fires and not have a coordinated plan.

In Hong Kong trading Hang Seng Index increased 3.4% or 420.66 to 12,878.60, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, soared 4.4% or 281.04 to 6,658.00. In Shaghai trading CSI 300 Index dropped 0.2% or 3.35 to 1,834.29.

Daily turnover on main board increased to HK$41.2 billion from HK$35 billion yesterday.

China''s Economy to Grow 7.5%

The World Bank reported in its quarterly update that China''s economy is forecasted to grow at a slower pace of 7.5% in 2009, a decline from 9.4% in 2008.

More than half of the China’s GDP growth is projected to be government influenced spending. Export growth is projected to drop to 3.5% in 2009 from 11% in 2008. The bank said China''s demand is declining on weaknesses in the real estate market, which is now impacting the cement and steel industry.

Private consumption is expected to soften in 2009 but is forecasted to receive support from fiscal policy.

World Bank Country Director for China David Dollar says China must develop a growth model that focuses on domestic demand and domestic needs and build infrastructure that addresses future needs such as energy efficiency, urban public transport and high speed rail as part of its stimulus package.

Government to Spend Rmb400 billion on Equity Markets

China Daily Online reported that the National Development and Reform Commission said in a proposal to be discussed at the Central Economic Work Conference in early December and will inject Rmb400 billion to support equity markets and boost market confidence.

The proposed stimulus package will be as large as 10% of total market capitalization on two largest exchanges.

Gainers & Losers

Trading was volatile ahead of the quarterly rebalancing in the MSCI Barra indices. China Southern Airlines fell 8.8% and China Eastern declined 11%.

ICBC gained 9.3% after Goldman Sachs added the stock on its preferred list of stocks to buy. CNOOC soared 6.6%, PetroChina gained 4.9% and Sinopec edged up 4.2% as oil prices increased 9.2% yesterday.

Hutchison Telecommunications fell 16.7%.