HK, Shanghai Stocks Fall; Foreign Reserves Rise

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

Hong Kong benchmark index fell 3.8% and Shanghai index plunged 5.9%. Hong Kong foreign currency reserves increase to US$182.5 billion at the end of December. Lenovo Group stock plunged 26% after it announced a plan to cut 11% jobs.

[R]6:00AM New York, 6:00PM Hong Kong - Hong Kong foreign currency reserves increase to US$182.5 billion at the end of December. Lenovo Group stock plunged 26% after it announced a plan to cut 11% jobs.[/R]

Market Sentiment

In Hong Kong trading Hang Seng Index fell 3.8% or 571.55 to 14,415.91, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, declined 5.9% or 484.66 to 7,760.02. In Shanghai trading CSI 300 Index slipped 2.2% or 43.19 to 1,887.99.

Daily turnover on main-board fell to HK$55.5 billion from HK$90 billion yesterday.

HK Foreign Currency Reserves Rise

The Hong Kong Monetary Authority reported official foreign currency reserve of $182.5 billion at the end of December compared with $165.9 billion at the end of November.

Reserves, including unsettled forward contracts were $184.8 billion at the end of the month.

The increase was attributed to the purchase of foreign currency using the Hong Kong dollars. Hong Kong is the eighth largest holder of foreign currency reserves after Mainland China, Japan, Russia, Taiwan, India, Brazil and Korea.

On the overall, total foreign currency reserve assets at $182.5 billion are estimated to be eight times the currency in circulation.

Lenovo to Shed 11% of Staff

Lenovo reported that it forecasts a loss for the three months to December and will cut 2,500 jobs worldwide, including some management positions, or 11% of its staff.

Executive compensation will be cut by 30% to 50%.

The company said it will save $300 million in the fiscal year ending March 31, 2010 as a result of the restructure and expects a pretax charge of $150 million, of which a significant portion will be taken in the December quarter.

The PC maker will consolidate its Asia-Pacific and China operations into a single business unit.

Chief Executive William J. Amelio said, “As hard as this news is for all of our Lenovo employees, we believe the steps we are taking today are necessary for Lenovo to compete in today''s economy.”

Gainers & Losers

Hong Kong market averages fell on the worries that investors will reduce their holdings in the Industrial and Commercial Bank of China after their lock up agreements lapse this year.

Lenovo stock plunged 26% after it issued a profit warning and reduce 11% of its staff also weakened market sentiment. The stock fell 26% to HK$1.91.

China Mobile declined 3.1% after Beijing granted 3G licenses to the country’s three mobile operators.

Financial stocks dipped on fears that Goldman Sachs, Allianz and American Express will lower their holding in the Industrial and Commercial Bank of China when their lock up agreements lapse this year.

Investors are also worried that the Royal Bank of Scotland will sell its stake in Bank of China to boost its balance sheet.

China Construction Bank plunged 4.4% and Bank of China fell 8.4% after BoA and billionaire Li Ka-shing unloaded a cumulative $3.3 billion worth of shares in the two banks.

Commodity stocks fell after crude oil prices for February delivery fell below 43% per barrel. CNOOC declined 6.7% to HK$7.37 and PetroChina dipped 5.2%.

Aluminum Corp of China slipped 9.3% and Angang Steel plummeted 12.2%.

Cathay Pacific Airways fell 7.6% to HK$8.97 after the airliner cautioned that its 2008 earnings will be below forecasts on weak earnings and fuel hedging losses of HK$7.6 billion.