China GDP Expands 8.9%; Inflation Worries

123jump.com Staff
22 Oct, 2009
New York City

China reported third quarter gross domestic product rise of 8.9%. Investors worried that the government may cut the economic stimulus as property prices and stocks rise in the year. Hong Kong and Shanghai stocks fell. Datang International Power swung to a net profit on a sharp drop in coal prices.

[R]7:30 AM Hong Kong, 7:30 PM New York – China reported third quarter gross domestic product rise of 8.9%. Investors worried that the government may cut the economic stimulus as property prices and stocks rise in the year. Hong Kong stocks are expected to open higher on the back of a rally in New York. Datang International Power returned to net profit on 44% decline in coal prices.[/R]

Gross domestic product in China expanded at 8.9% from a year ago as the government stimulus supported investment and domestic consumption. However, the statistics bureau also noted that inflationary pressures are also building in the economy.

The strong and sustained domestic demand expanded the economy in the first nine months at 7.7%. Consumption increased at 4% and investments added 7.3% to the economic expansion but the fall in international traded dragged the economy by 3.6%.

Though exports have been falling for the eleven of the last twelve months, the outlook for the next quarter is brighter than a year ago.

Rising domestic exports and lending for the home purchases have sustained the auto industry and home builders. The home prices in seventy largest cities in China increased at the fastest pace in September.

Commodities prices fell in New York and London after China reported the GDP data. China statistics bureau also said that inflationary pressures are rising. But copper prices increased 2.2% to Rmb 1,110 after the release of the data.

The stocks in the region fell on the worries that the government may tighten the economic policy. Hang Seng index in Hong Kong decreased 107.59 or 0.48% to 22,210.52, and CSI 300 index in China lower 21.96 or 0.65% to 3,347.32.

China Movers

Datang International Power Generation Co swung to a profit in the third quarter of Rmb 374.2 million or Rmb 0.032 a share compared to a net loss of Rmb 432.9 million or Rmb 0.037 a share. The fall in coal prices helped the power company to return to the quarterly net profit.

In the first half the net increased 53% to Rmb 722 and in the first nine months reported a net income of Rmb 1.09 billion compared to a loss of Rmb 13.9 million a year ago period.

Datang dropped 2.6% to HK$4.08.

China Shipping Development Company third quarter net dropped 81% to Rmb 292 million or Rmb 0.08 per share. For the nine months the profit declined to Rmb 905.7 million.

The parent of the company, China Shipping Group increased 1% to HK$11.98 ahead of earnings.

Property stocks declined on the worries that the government may withdraw support as the economy may overheat.

China Overseas Land & Investment Ltd decreased 0.7% to HK$18.20 and Soho China Ltd declined 3.5% to HK$4.73.

Esprit decreased 2.6% to HK$53.55 after the apparel retailer reported fiscal first quarter sales declined 8% to HK$9.37 billion or $1.21 billion.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 66.22 or 0.64% to 10,267.17, Hang Seng index in Hong Kong decreased 107.59 or 0.48% to 22,210.52, and CSI 300 index in China lower 21.96 or 0.65% to 3,347.32. ASX 200 index in Australia decreased 25.80 or 0.53% to 4,812.80. The FTSE Bursa KL Composite index in Malaysia was lower 0.04 or 0.00% to 1,260.02.

The Kospi Index in South Korea decreased 23.53 or 1.42% to close at 1,630.33 SET Index in Thailand closed lower 7.59 or 1.06% to 708.76. JSE Index in Indonesia decreased 43.61 or 1.76% to 2,433.18. The Sensex index in India decreased 219.43 or 1.29% to 16,789.74.