HSBC Rights Issues Drags Stocks in HK

Darlington Musarurwa
09 Mar, 2009
New York City

The benchmark index in Hong Kong dropped nearly 5% after HSBC finalized the price of rights offering at a significant discount to its recent price. The news of the discount and size of the offering dragged market averages lower. Foxconn International dropped 15% after profit plunged 83%.

[R]6:00AM New York, 6:00PM Hong Kong - HSBC rights issue dampens Hang Seng Index.[/R]

In Hong Kong trading Hag Seng Index fell 4.8% or 576.94 to 11,344.58, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, plunged 0.9% or 58.89 to 6,725.58. In Shanghai trading CSI 300 index fell 3.7% or 84.05 to 2,202.53.

Daily turnover fell to HK$35.8 billion from HK$46.9 billion on Friday last week.

China Extends Rmb1 billion Loans

Ministry of Finance reported today that China supplied Rmb1 billion credit to 330 qualified credit guarantors in the second half of February to ensure that small and medium sized enterprises get bank loans.

According to the finance ministry, the 330 credit guarantee institutions insured loans of Rmb114.8 billion for 40,000 SMEs last year.

The ministry said subsidies will also assist in guarantee business for SMEs and help to raise development capital.

China Aviation Industry Losses Increase

Xinhua News Agency reported today that Vice Minister of the Civil Aviation Administration of China Yang Guoqing said during the Second Session of the 11th National Committee of the CPPCC China’s entire aviation industry posted a huge loss of Rmb28 billion for 2008.

Freight turnover eased to 2.4% and passenger traffic volume slowed to 3.3% as a result of the snowstorms, the earthquake that hit the Sichuan Province and the financial crisis.

The operations of the airline companies are showing signs of recovery with profits rising to Rmb40 million in January. However, cargo volume continues to decline.

""""An end to the impact of the financial crisis is yet to be seen rather than be blindly optimistic, the civil aviation industry must actively cope with the crisis,"""" said Yang.

China has Room for Further Cuts

Separately, the online edition of the news agency reported that the vice governor of the People’s Bank of China Su Ning said Beijing has further room to cut interest rates.

Ning said the central bank will carry out the moderately easy monetary policy through various instruments such as open market operations, interest rate adjustment and reserve requirement ratio.

""""We still have got plenty of space in monetary policy maneuver,"""" said Su.

Gainers & Losers

Hong Kong market averages plummeted 4.8% driven by lender HSBC after investors were spooked by news a fund sold 11.9 million shares.

HSBC announced plans for a $17.7 billion right issue priced at HK$28 per share in Hong Kong, the largest ever cash call by a British company.

Foxconn International Holdings declined 14.8% to HK$2.19, after the manufacturer of handsets reported that annual profit fell 83%. Economists had earlier projected a 63% drop.

ICBC increased 1.9%.

PCCW edged up 1.1% to HK$3.83.

Johnson Electric tumbled 17.7% to HK$1.07 after the company cautioned of a loss in the second half through March 2009.