China Investors Turn Cautious; Lenovo Loss

Darlington Musarurwa
21 May, 2009
New York City

Stocks in Shanghai and in Hong Kong are expected to trade lower after the U.S. dollar weakened and benchmark indexes in New York declined. Investors in China region are discounting the prospect of quick recovery in the region as investors shy away from risky assets.

[R]8:00AM Hong Kong, 8:00 PM New York – Stocks in Shanghai and in Hong Kong are expected to trade lower after the U.S. dollar weakened and benchmark indexes in New York declined. Investors in China region are discounting the prospect of quick recovery in the region as investors shy away from risky assets.[/R]

U.S. stocks declined on cautious views on the economy and elevated jobless claims and the UK debt worries dragged European markets lower.

The UK debt watch sent alarms that the U.S. sovereign debt may face downgrade unless the government restrict its debt. UK is likely to join Spain, Greece and Italy which suffered debt downgrade in recent months and the U.S. debt may lose its top rating.

In Thursday’s trading Hang Seng index decreased 276.35 or 1.58% closed to 17,199.49, CSI 300 index in China lower 62.86 or 2.23% closed to 2,750.01.

After the market closed yesterday, Lenovo Group Ltd reported fourth quarter loss of $264 million compared to net income of $140 million. In the third quarter the company reported a loss of $96.7 million. The company expects more troubles ahead and guided weak outlook for the current fiscal year.

Before the announcement the stock was down 4% to HK$2.99.

HK Gainers & Losers

Foxconn edged 5.1% lower HK$5.27.

Melco dropped 9.7% to HK$5.38 after it reported revenues decline of 55% and net loss.

China Shipping Development Co. declined 3.1% to HK$10.52 after the dry bulk carrier rating was lowered by Credit Suisse. The bank also lowered its target price to HK$8.80 and commented that freight rates are likely to fall before they can rise again.

China Yunnan Tin Minerals Group Co. plunged 7% to HK$24.1 after it reopened from a trading halt. The company is going to sell additional shares to its chairman of 600 million and simultaneously he will sell these shares to six other investors. The news was reported to the Hong Kong Stock Exchange.

Earnings Review

Melco Crown Entertainment Limited, the Hong Kong-based casino operator reported first quarter revenues fell 55% to $216.5 million from $482.9 million a year ago. Net loss in the quarter was $35.3 million or 8 cents per ADS compared to net profit of $43.2 million or 10 cents per ADS a year ago.

Shanghai Movers
After the World Bank cautioned that the expectations of Chinese recovery are premature, investors in Shanghai recalibrated their expectations. Several institutional investors voiced their concerns that stocks in China may be ahead on valuations and economy may take longer to recover.

Real estate developers, banks and automakers closed down.

Poly Real Estate Group Co. declined 4% to 21.89 yuan after it confirmed that Chinese securities regulators approved its plan to raise as much as 8 billion yuan. Gemdale declined 3.5% to 16.27 yuan.

Worries of rising credit defaults dragged smaller banks lower. Minsheng Banking declined 4.5% to 6.20 yuan and Shanghai Pudong Development Bank edged 3% lower to 24.80 yuan.

SAIC Motor declined 3.3% to 14.20 yuan and Beiqi Foton Motor lost 4.1% to 12.32 yuan.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 80.49 or 0.86% to 9,264.15, Hang Seng index in Hong Kong decreased 276.35 or 1.58% closed to 17,199.49, CSI 300 index in China lower 62.86 or 2.23% closed to 2,750.01. ASX 200 index in Australia decreased 10.70 or 0.28% closed to 3,813.90. The KL Composite index in Malaysia lower 7.07 or 0.68% closed to 1,035.56.

The Kospi Index in South Korea decreased 14.05 or 0.98% to close at 1,421.65. SET index in Thailand closed lower 12.64 or 2.25% to 548.77.The Sensex index in India decreased 324.12 or 2.31% closed to 13,736.54. The Markets of Indonesia were closed today.