China Stocks Reflect Weak Commodities Prices

Darlington Musarurwa
21 Sep, 2009
New York City

China considers raising hydroelectric power prices. CBRC urges lenders to increase internal risk management. IPO activity in China is picking up with the pricing of Metallurgical Corp and a filing by China International Travel Services Corp.

[R]8:00AM Hong Kong, 8:00 PM New York - China considers raising hydroelectric power prices. CBRC urges lenders to increase internal risk management.[/R]

Stocks in Shanghai and in Hong Kong are expected to open lower after the fall of commodities prices in overnight trading in New York and London. There is a growing perception among investors that stock market valuations are ahead of economic fundamentals.

Hong Kong stocks tumbled following an Asia wide fall on concern they are overvalued. A rising dollar in afternoon trade also helped increase the sell-off.

Investors sold commodities as crude oil prices fell 0.6% to $72 a barrel and gold prices declined 0.3% to $1,010 per ounce.

In Hong Kong trading Hang Seng Index declined 0.7% or 150.60 to 21,472.85, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, tumbled 1.6% or 8.90 to 4,677.40.

In Shanghai trading, the CSI 300 Index rose 0.3% or 8.92 to 3,208.60 led by retailers.

Daily turnover on main-board eased to HK$57.5 billion.

China Considers Raising Hydro-Electric Power Prices

Xinhua News Agency reported that Beijing is considering raising hydropower electricity prices to subsidise residents that were displaced by the power projects.

Vice minister of the National Development and Reform Commission Zhang Guobao said the commission will increase hydropower electricity prices to the same level as coal-fired power plants.

Electricity from hydropower plants is sold at 0.2 yuan (3 U.S. cents) to 0.3 yuan per kilowatt-hour to power distributors and 0.4 yuan to 0.5 yuan per kilowatt-hour for electricity from coal-fired power plants.

China has relocated 1.27 million people by the end of June for the Three Gorges Dam that was initiated in 1993.

“The commission is about to raise hydropower electricity prices to the same level as coal-fired power plants in a pilot move. Currently, compensation for relocated residents has become the biggest obstacle to the development of hydropower plants in China,” said Zhang.

According to the report, China’s installed capacity for hydropower facilities by the end of 2008 increased to 178 million kilowatts, while hydropower plants generated 563.3 billion kilowatt-hours.

CBRC Calls for Increased Risk Management

China Banking Regulatory Commission said on its Website today that it expects lenders to improve internal risk management as new loans continue to rise.

Bank lending rose to Rmb8.15 trillion by the end of August nearly 70% surge from Rmb4.9 trillion for 2008.

Beijing recently unveiled Rmb4 trillion stimulus package to stem the adverse effects of the global financial crisis.

IPO Pricing and Filings

China International Travel Services Corp filed to sell 220 million shares at a price between Rmb10.80 and Rmb11.78 according to a regulatory filing.

Metallurgical Corp listing today also spurred investor sentiment. The stock closed up 28%.

Gainers & Losers

Financial stocks dropped after last week’s rally. HSBC shed 0.3% to HK$90.95, while ICBC shed 2.3%.

Pudong Bank tumbled 3% after reporting it has regulatory approval to sell 1.14 billion new shares through a private placement and Industrial Bank Co. dropped 2.2%.

Galaxy Entertainment advanced 9.54% after two casino executives said China had relaxed restrictions on travel to Macau, especially by residents of Guangdong province.

Melco International Development jumped 7.7% to HK$5.87 after the company said yesterday it will sell its remaining 160.9 million shares or 43.24% of the issued share capital of securities at HK$1.92 each.

Retailers increased ahead of the National Day holidays between October 1 and October 8 next week. Shanghai Bailian Co. soared 6.7% and Beijing Xidan Department Store climbed 10%.