China Rejects Coca Cola Bid

123jump.com Staff
18 Mar, 2009
New York City

World Bank lowers economic growth of China forecast to 6.5%. Chinese regulators reject Coca-Cola $2.4 billion bid to purchase Huiyuan Juice, the company with the largest market share. Stocks in Hong Kong rose on short covering and ahead of HSBC rights offering tomorrow.

[R]6:00AM New York, 6:00PM Hong Kong – World Bank lowers China’s economic growth forecast to 6.5%. China rejects Coca-Cola’s $2.4 billion bid for Huiyuan Juice.[/R]

Hong Kong stocks gained as investors showed willingness to commit additional funds. The increase was however trimmed after World Bank lowered economic growth estimate of China.

In Hong Kong trading Hang Seng Index increased 1.9% or 239.08 to 13,117.17, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, advanced 1.7% or 124.44 to 7,632.52. In Shanghai trading CSI 300 Index edged up 0.4% or 10.25 to 2,332.65.

Daily turnover on main-board declined to HK$37.5 billion from HK$49 billion a year ago.

Economic Growth Forecast Cut to 6.5%

World Bank lowered China’s economic growth forecast for the current calendar year to 6.5% from the previous estimate of 7.5%.

The report notes that although the country’s financial institutions have been largely unscathed by the global financial turmoil, the intensified global financial crisis has begun to affect exports and the manufacturing sector.

However, the 6.5% growth rate is lower than potential growth as the “economy still has plenty of space to implement forceful stimulus measures.”

The report also notes that economic growth in China will likely outgrow most other countries.

World Bank country director David Dollar said, “China is a relative bright spot in an otherwise gloomy. Shifting China’s output from exports to domestic needs helps to provide immediate stimulus while laying the foundation for more sustainable growth in the future.”

China Rejects Coca-Cola’s $2.4 billion bid

China’s Ministry of Commerce today rejected Coca-Cola’s $2.4 billion bid to acquire Huiyuan Juice citing that the transaction would unduly restrict competition.

The deal would have been the largest takeover of a Chinese company by a foreign entity.

The commerce ministry says the deal will limit the entry of new players and adversely affected both small players in the beverage industry and result in higher prices for consumers.

According to the statement, China had initially urged Coca-Cola to propose a revised deal that restricts the purchase to a smaller business but Coca-Cola offer did not meet Chinese regulatory demands.

Huiyuan Juice is estimated to have more than 32% market share in China.

Gainers & Losers

Hong Kong stocks rebounded led by HSBC on short covering.

However market watchers say earnings from China Mobile and a rights issue by HSBC tomorrow will help indicate the direction of the market.

Huiyuan Juice suspended trading after plunging 22% on news Coca-Cola might abandon its $2.4 bid for the company.

HSBC advanced 5.8% to HK$42.70.

Energy stocks increased after crude oil prices dropped 3.8% to $49.2 per barrel. PetroChina advanced 2.2% to HK$5.95.

Bank of Communications climbed 1.9% to HK$5.25 ahead of its 2008 earnings announcement today. The lender however later announced that its fourth quarter profit slipped 2%.

ICBC gained 1.5% to HK$3.50 and China Construction Bank edged up 3.5%.

China Resources Microelectronics advanced 5.8% after reporting that its parent China Resources, which has 60.7% equity is offering HK$0.30 per share to take the company private.