China Markets Rebound, Manufacturing Shrinks

Darlington Musarurwa
04 Feb, 2009
New York City

Manufacturing activity in China contracts but at a slower pace in January. Steel and base metal makers traded higher on a rise in commodities prices. Commercial property builders in Hong Kong dropped for the second day in a row on rising negative equity mortgages and continued fall in property price

[R]6:00AM New York, 6:00PM Hong Kong – Manufacturing activity in China contracts but at a slower pace in January. Steel and base metal makers traded higher on a rise in commodities prices. Commercial property builders in Hong Kong dropped for the second day in a row on rising negative equity mortgages and continued fall in property prices.[/R]

The benchmark index gained in Hong Kong on expectations that the recent stimulus plan will help homeowners and small businesses.

Commodity stocks advanced.

In Hong Kong trading Hang Seng Index increased 2.3% or 287.00 to 13,063.89, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, advanced 4.1% or 281.61 to 7,241.72. In Shanghai trading CSI 300 Index added 2.7% or 57.50 to 2,166.41.

Daily turnover on main-board increased to HK$36.5 billion from HK$35.3 billion yesterday.

China’s Manufacturing Activity Contracts

China Federation of Logistics and Purchasing reported today that the purchasing manager’s index of the country’s manufacturing sector advanced 45.3% in January from 41.2% a month ago, contracting for the fourth straight month. The industry still shrank but at a lower rate.

A reading above 50% indicates expansion and a reading below 50% represents contraction.

China Mobile to Increase Subsidies 25%

Peoples Daily Online reported today that China Mobile chairman Wang Jianzhou said at the World Economic Forum in Davos the company will increase mobile phone subsidies by 25% to Rmb10 billion this year from Rmb8 billion in the previous year.

Jianzhou said the move is meant to attract more customers to use 3G services.

China Mobile plans to provide third generation services to 38 cities on the mainland.

Gainers & Losers

Hong Kong stocks increased 2.3% on reports Beijing will unveil a stimulus plan, larger than earlier estimated.

However property stocks trimmed gains as the number of home loans with negative equity increased three-fold in the December quarter. Sino Land dropped 1.3% to HK$6.66 and Henderson Land slipped 1.6%.

China Mobile declined 2.8%.

Air China increased 8.6% to HK$2.14 after Deutsche Bank upgraded the stock to “buy”, citing lower jet fuel prices and government intervention.

Cathay Pacific fell 1.6% to HK$8.44 after its rating was slashed to “sell” by Deutsche Bank.

Angang Steel advanced 12.6% to HK$8.22 on a rise in commodity prices.

Maanshan Iron & Steel jumped 10.7% to HK$2.91 and Aluminum Corp of China climbed 7.3%.

Shipping lines rose as the Baltic Dry Index, which measures freight charges for raw materials, gained 4.5%. China COSCO edged up 14.4% to HK$5.31, China Shipping Development increased 10.8% to HK$8.4 and China Shipping Container Lines advanced more than 10% to HK$1.33.