China Bond Auction Weak; Real Estate Stocks Fall

Mayank Mehta
08 Jul, 2009
New York City

China bond sale drew less than expected interest from investors. Investors are worried that rates may be on the rise as China drains liquidity from the markets. Real estate, banks and energy stocks closed lower in Shanghai and Hong Kong.

[R]7:00 PM Hong Kong, 7:00 AM New York – China bond sale drew less than expected interest from investors. Investors are worried that rates may be on the rise as China drains liquidity from the markets. Real estate, banks and energy stocks closed lower in Shanghai and Hong Kong.[/R]

Hong Kong stocks closed lower after global markets and international commodities prices declined. Banks and metals companies led decliners. China failed to raise capital as much it had hoped for in a bond offering as investors worry that interest rate may be on the rise.

Ministry of Finance in China completed its 27.5 billion yuan one-year bond offering that yielded 1.06%. The ministry had expected to raise 28 billion yuan. The central bank is scheduled to raise 100 billion yuan in tomorrow’s auction by selling bonds with maturities of 3-month and 1-year.

Investors in the China region cautioned that the U.S. may need second stimulus package indicating the U.S. economic decline has still not halted and exports from China may have more to fall.

Hang Seng index dropped 0.8% or 141.02 to 17,721.07 and trading turnover increased to HK$57.1 billion from HK$50.70 billion.

Gainers & Losers

Mainland based Chinese banks declined on the worries that central bank may be forced to restrict additional liquidity.

Bank of Communications declined 3.1% to 9.56 yuan, Industrial and Commercial Bank of China dropped 2.7% to 5.28 yuan and China Construction Bank dropped 2.8% to 6.20 yuan in Shanghai trading.

Property developers declined after China raised the limit for down payment for a second home in Hangzhou to 40% from 20% according to a report on Reuters.

However, Poly Real Estate Group surged 4.1% to 29.88 yuan in Shanghai after it sold homes worth 6.3 billion yuan in June. Shimao Property Holdings dropped 2.9% to HK$14.54.

Guangzhou R&F Properties plunged 5% to HK$16.42 and China Overseas Land & Investment dropped 2.9% to HK$16.76.

Jiangxi Copper declined 1.9% to 12.30 yuan on weak commodities prices.


China Unicom surged 5% to HK$10.78 on the speculation that the company is likely to partner with Apple to sell its popular iPhone.

Brokerage stocks in Shanghai surged on China Daily reports that China State Construction Engineering Corp may complete the largest public offering and list shares in Shanghai in August.

Northeast Securities and Guoyuan Securties surged nearly 9.5%.

PetroChina dropped in Hong Kong and in Shanghai after crude oil price fell below $62 a barrel.