China Worries Speculative Asset Flows

Darlington Musarurwa
30 Dec, 2009
New York City

China is expected to a sharp increase in inflation in December as energy and commodities prices rise. China estimated $16 billion of international inflows in November that may be contributing to the asset price inflation.

[R]6:00 AM New York, 6:00 PM Hong Kong – China is expected to a sharp increase in inflation in December as energy and commodities prices rise. China estimated $16 billion of international inflows in November that may be contributing to the asset price inflation.[/R]

Hong Kong stocks fell after China Mobile declined and weak global market sentiment ahead of holidays. Stocks in Shanghai increased on the higher than expected economic growth in the current year.

Economists forecast China’s consumer price index will rise 1.5% in December.

In Hong Kong trading Hang Seng Index dropped 0.01% or 2.82 to 21,496.62, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, decreased 0.9% or 114.16 to 12,530.77. In Shanghai trading, CSI 300 Index jumped 1.7% or 58.12 to 3,558.86.

Daily turnover of main-board rose to HK$47.76 billion from HK$34.42 billion yesterday.

China Inflation to Pick up to 1.5%

People’s Daily Online reported today market watchers say China’s consumer price index is expected to rise 1.5% in December.

China International Capital Corporation Ltd. forecasted earlier that inflation may soar to 1.6% in December from a year ago.

The report notes that data released by the ministry of commerce and the ministry of agriculture show that agricultural products prices continued to increase in December, but lower than the previous month, with prices increasing between 0.5% and 1% in the first three weeks of December.

Speculative Money Feeds Asset Bubbles

China Daily reported today that a member of the People’s Bank of China monetary policy committee Fan Gang said the increasing inflow of speculative capital may lead to asset bubbles.

Inflows rose by $37.2 billion to $2.78 trillion by the end of November. According to the report, the $37.2 billion is $16 billion more than the cumulative trade surplus and foreign direct investment in November.

Economists estimate that the $16 billion may be “hot money” intended to capitalize on the rising yuan or the realty sector.

Gainers & Losers

Utility stocks gained as investors opted for defensive stocks. China Resources Power edged up 1.9% to HK$15.20, CLP Holdings advanced 0.2% and Hong Kong Electric soared 0.2%.

China Mobile increased 1% to HK$70.35 after it announced that it is on course for a listing in Shanghai.

Financial stocks continued to be weak. China Life fell 0.4%, Ping An dropped 0.7%, Bank of Communications decreased 0.9% and ICBC plunged 0.9%.

China Construction Bank fell 1.2% to HK$6.48 on reports ING will offload its 50% stake in Chinese insurer Antai to China Construction Bank as part of its ongoing restructuring program.

China Citic Bank increased 1.2% to HK$6.54 and said its board approved Rmb 25 billion bonds offering in 2010 to strengthen capital.

PetroChina decreased 1.1% as crude oil prices fell.

Kaisa Group jumped 6.5% to HK$2.97 after it announced to form an alliance with Sino Life Insurance to explore investment opportunities in commercial properties for five years.

The recently listed Carpenter Tan advanced 16%.

BYD fell 3.3% to HK$66.50 after shareholders increased its sales target for next year to 14%.

Energy stocks rose in Shanghai. Sinopec Corp rose 3.1% to Rmb4.14 and PetroChina climbed 1.9% to Rmb13.81.

Insurance companies rose after the Securities Times reported that new regulations on calculating insurers'' earnings, due to take effect next year, will boost profits next year. Ping An Insurance rose 4.3% to Rmb54.57 and China Life Insurance soared 3.6% to Rmb31.59.

Suning Appliance Co Ltd decreased 0.7% to Rmb20.60 after it agreed to acquire HK$215 million Citicall Retail Management ltd with 22 stores in Hong Kong. Of the total price, HK$180 million is for inventory and asset management and HK$35 million is for its name and store network.