China Shipbuildind IPO; HK Real Estate Worries

Darlington Musarurwa
04 Dec, 2009
New York City

China Shipbuilding Industry filed to sell shares in an IPO to raise $2.2 billion. Chinese state controlled companies lost nearly $1.7 billion in derivative transactions and regulators partly blamed foreign banks for losses. Investors worry about real estate bubble in mainland China and in Hong Kong.

[R]6:00 AM New York, 6:00 PM Hong Kong – China Shipbuilding Industry filed to sell shares in an IPO to raise $2.2 billion. Chinese state controlled companies lost nearly $1.7 billion in derivative transactions and regulators partly blamed foreign banks for losses. Investors worry about real estate bubble in mainland China and in Hong Kong.[/R]

Hong Kong stocks dropped on profit taking on lingering concerns of asset bubbles, while Shanghai stocks advanced on increased prospects of economic recovery.

In Hong Kong trading Hang Seng Index declined 0.3% or 55.72 to 22,498.15, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, edged up 0.02% or 2.49 to 13,461.55. In Shanghai trading Hang Seng Index jumped 1.5% or 52.62 to 3,643.49.

Daily turnover on main-board rose to HK$74.04 billion from HK$70.07 billion yesterday.

China Shipbuilding Industry Co filed to raise as much as Rmb 14.7 billion or $2.2 billion through the sale of 2 billion shares. The shares are expected to be priced between Rmb 6.15 and Rmb 7.38.

China State Firms Lose Rmb11.4 billion

Global Times reported today that a recent study done by the Party School of the Central Committee showed that 68 central state-owned enterprises have suffered a net floating loss of Rmb11.4 billion or $1.7 billion in the past decade.

Losses were on reckless investments in international financial derivatives.

The Chinese officials linked the losses at 68 state controlled enterprises to derivative contracts that are partly linked to “fraudulent practices” of foreign banks including commodities futures, swap rates, interest-rate swaps, options and structured deposits.

The report notes that by the end of October 2008 total market value of the derivative products that the SOEs had invested in reached Rmb125 billion, while the net floating loss reached Rmb11.4 billion, including Rmb13 million in losses from investment in domestic derivatives and Rmb1.27 billion in overseas markets.

In addition, the report says foreign investment banks created most losses for Chinese enterprises by capitalizing on the inexperience of these SOEs in derivative markets.

Gainers & Losers

Hong Kong realty stocks fell on the worries of an asset price bubble. Henderson Land fell 2.3% to HK$59.15 and Sun Hung Kai Properties rose 0.1% to HK$118.60.

Chinese financial stocks fell on profit taking. ICBC decreased 0.2% after rising in the previous trading sessions on reports the lender is in talks to buy a stake in Taiwan''s Cathay Financial.

China Construction Bank slipped 0.3% and Bank of China slid 1.6%.

China’s realty stocks rose. China Overseas Land jumped 2.4% and R&F Properties edged up 2.8%.

Futong Technology increased to HK$2.25 on its trading debut on Friday, which is 38% from
China Automotive fell 7.4% to HK$2.25 after announcing its shareholder Hauchen sold 500 million shares to raise $145 million.

BYD Co Ltd climbed 2.6% to HK$76.50 after receiving Rmb15 billion from the Bank of China.

China Pacific Insurance jumped 10% to Rmb27.12 and PetroChina soared 3.3% to Rmb13.97.