Manufacturing in China Shrinks; Stocks Rise

123jump.com Staff
05 Jan, 2009
New York City

Manufacturing index in China dropped for the third month in a row as companies shrink labor force and orders weaken. China plans to unveil stimulus package for auto industry aimed at encouraging sale of low emission cars. China issued third generation telecom licenses.

[R]6:00AM New York, 6:00PM Hong Kong – Manufacturing index in China dropped for the third month in a row as companies shrink labor force and orders weaken. China plans to unveil stimulus package for auto industry aimed at encouraging sale of low emission cars.[/R]

China''s PMI rises to 41.2% in December. China to unveil stimulus package for auto industry.[/R]

Market Sentiment

In Hong Kong trading Hang Seng Index added 3.5% or 520.51 to 15,563.31, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, advanced 4.4% or 362.64 to 8,676.75. In Shanghai trading CSI 300 Index soared 3.6% or 65.24 to 1,882.96.

Daily turnover on main-board increased to HK$49.4 billion compared to HK$30.5 billion on Friday last week.

China''s PMI Rises 41.2% in December

Xinhua News Agency reported today that China Federation of Logistics and Purchasing said Purchasing Managers Index of China''s manufacturing sector rose 2.4 percentage points to 41.2% in December from a month ago, but below 50 for the third month in a row.

A reading below 50 shows economic contraction.

The indices measuring new orders gained 5 percentage points to 37.3%, while new orders for export gained 1.7 percentage points to 30.7% in December from a month earlier.

According to the report, the sub-index of output increased 3.9 percentage points to 39.4% and purchasing prices advanced 6.1 percentage points to 32.7%.

Of the 20 industries in the index, only the beverage and pharmaceutical manufacturing industries expanded, while ten industries including non-ferrous metal smelting, chemical fiber and transport equipment manufacturing industries declined.

China to Unveil Stimulus Package for Auto Industry

People’s Daily Online reported today that China will unveil a stimulus package that will encourage low-emission vehicle demand. The package will lower or exempt taxes on sales.

The report notes that the plan encourages customers to buy low-emission cars, encourages auto makers to develop self-owned brands, reducing and exempting taxes on auto purchases, carrying out reform on fuel tax, supporting the development of new energy vehicles, and providing subsidies for vehicles that are required to be discarded one year ahead of time.

Gainers & Losers

Hong Kong stocks advanced on reports that the Beijing will soon unveil a stimulus package for the auto industry.

Foxconn jumped 25.4% to HK$3.80 on speculation the company will benefit from the rollout of 3G services in China.

Aluminum Corp of China gained 9.5% on expectations that the stimulus package will promote growth in the sector.

Energy stocks rose as oil prices soared to $46 a barrel on continued turmoil in the Middle East as Israel launched a ground operation in Gaza. CNOOC edged up 7.9% and PetroChina increased 6.9%.

Hong Kong Exchanges & Clearing climbed 8% on increased activity after the New Year Holidays.

Fixed-line operator PCCW declined 4.6% after Citigroup cut its rating on the stock to “hold” from “sell,” after the company rejected the revised offer at HK$4.50 a share.

China Mobile increased 4.7% after China approved issuance of new licenses for new mobile networks. China Unicom climbed 7.3%.

Lenovo Group rose 5% after Chinese magazine Caijing said the personal computer maker will announce a restructuring plan on January 8.