China Lifts Fuel Prices; HK Attracts Liquidity

Darlington Musarurwa
09 Nov, 2009
New York City

Hong Kong stocks gained as investors pour money into real estate and stocks forcing HKMA to inject liquidity and prevent the HK dollar from rising. China increase fuel prices by as much as 8%. Chinese banks were warned of uncontrolled lending.

[R]6:00AM New York, 6:00PM Hong Kong – Hong Kong stocks gained as investors pour money into real estate and stocks forcing HKMA to inject liquidity and prevent the HK dollar from rising. China increase fuel prices by as much as 8%. Chinese banks were warned of uncontrolled lending.[/R]

Stocks in Hong Kong rose on continued inflows of liquidity into the market on the back of the peg of the Hong Kong currency to a weakening U.S. dollar. The steady fund flows forced the HKMA to force additional liquidity of HK$4.65 billion or $600 million to the financial system and prevent the Hong Kong dollar from rising.

Shanghai stocks gained for the seventh straight trading session led by financial stocks.

In Hong Kong trading Hang Seng Index rose 1.7% or 377.883 to 22,207.55, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, edged up 2.3% or 301.28 to 13,318.48. In Shanghai trading, CSI 300 Index soared 0.3% or 12.77 to 3, 495.79.

Daily turnover on main-board increased to HK$65.09 billion from HK$64.43 billion on Friday.

China raised prices of diesel, gasoline and jet fuel prices that is likely to encourage refiners to increase the supply. The price increase of as much as 8% was announced by the National Development and Reform Council on its Web site.

The gasoline price is likely to increase to 5.98 yuan for 90 octane grade per liter.

Banks Warned of Uncontrolled Lending

China Daily reported today that Bank of China head Xiao Gang has cautioned that uncontrolled lending by financial institutions to local governments could lead to systemic risks in the economy.

According to Xiao, some of the local government-led fund raising enterprises were borrowing beyond their repayment capacity.

Local governments are not allowed to issue bonds to finance their public works building projects and have to resort to bank loans.

An estimated Rmb8.37 trillion in loans have been extended to infrastructure projects this year.

Bank of China says the loans need to be monitored to ensure that there are not abused.

Gainers & Losers

China’s financial stocks gained. ICBC and China Construction Bank rose 3.1%.

China Life advanced 2.5%.

Dongfeng Motor Group Co increased 1.7% after reporting third quarter sales rose 77% from the same period a year earlier.

China Shenhua jumped 3.9%.

Lijun rose 6.8% after announcing that it has found a market for its new antiviral drug which is allegedly effective in blocking the spread of cells by the H1N1 virus in its early stages.

Utilities rose. Datang International Power Generation climbed 6.2%, Huadian Power gained 2.4% and Huaneng Power International advanced 2.6%.

Steel companies gained. Baoshan Iron and Steel increased 1.7%.

Shandong Gold gained 7.7% after gold prices rose 0.6% to $1,096 per ounce.