Rising Trade Tensions Between U.S., China

Mayank Mehta
25 Mar, 2010
New York City

Indexes in Shanghai and Hong Kong declined sharply on the worries that rising trade tensions may slowdown global trade. China may face higher trade barriers as the U.S. push for yuan revaluation. ICBC plans to raise $3.7 billion through bond sale.

[R]5:00 AM Hong Kong, China – Indexes in Shanghai and Hong Kong declined sharply on the worries that rising trade tensions may slowdown global trade. China may face higher trade barriers as the U.S. push for yuan revaluation. ICBC plans to raise $3.7 billion through bond sale. Chinese banks may need $55 billion to meet capital adequacy requirements.[/R]

Investors focused on rising trade tensions between the U.S. and China. U.S. lawmakers are vying to introduce new legislation ranging from added tariffs on China’s exports to currency manipulator status.

China is resisting the pressures to revalue the yuan higher as it battles inflation and worries a rise in unemployment.

Hang Seng index in Hong Kong decreased 230.07 or 1.10% to 20,778.55, and CSI 300 index in China lower 47.54 or 1.45% to 3,229.13.

Developers in Hong Kong and Shanghai trading declined after investors worried that commercial market weakness may spread to housing market. Investors are increasingly worried that China may face a boom and bust property market cycle similar to the US in the next few years.

Poly Real Estate and China Vanke dropped more than 1.7%.

Industrial & Commercial Bank of China Ltd is preparing to raise up to 25 billion yuan or $3.7 billion through the sale of 6-year convertible bonds to rebuild its capital base.

BNP Paribas SA estimated in a report that largest Chinese 11 banks will need to raise a total of 368 billion yuan to meet their capital adequacy ratio of 12%.

Shanghai Movers

Baoshan Iron & Steel Co., Ltd decreased 0.7% to 7.77 yuan and the company estimated that steelmaker will raise prices globally as they run down inventories and raw material costs rise.

China Huiyuan Juice Group Limited added 7.9% to 5.83 yuan after the manufacturer of fruit and vegetable juice said 2009 revenues rose 0.4% to 2.83 billion yuan from 2.82 billion yuan a year ago. Net profit in the year rose 163% to 233.5 million yuan compared to net profit of 88.9 million yuan a year ago.

China Railway Group Limited dropped 1.0% to 5.67 yuan after the railroad builder said today that it had won an Indonesian coal transport contract worth $4.8 billion.

China United Network Communications Limited fell 1.8% to 6.25 yuan after the company announced that it will pay a cash dividend of 0.0536 yuan per share.

Shenzhen Expressway Company Limited the toll road operator closed unchanged at 6.40 yuan.

Zhejiang China Commodities City Group Co., Ltd rose 0.4% to 49.29 yuan and the company plans to set up a foreign currency trading subsidiary.

Zhuzhou Smelter Group Co., Ltd dropped 3.0% to 13.64 yuan after the producer of refined zinc announced that the company will pay a cash dividend of 1.5 yuan (before tax) for every 10 shares they hold.

HK Movers

Bank of China Limited dropped 1.4% to HK$3.96 a day ago the state controlled lender reported a profit surge of four-fold.

BOC Hong Kong (Holdings) Limited fell 0.9% to HK$18.62 after the bank was downgraded to “hold” from “buy” at Kim Eng Securities Hong Kong Ltd.

China Construction Bank Corporation slipped 1.4% to HK$6.11.

China Resources Enterprise, Limited gained 5.2% to HK$28.90 after the property investment and Investment Company said 2009 sales rose 11% to HK$71.6 billion from HK$64.6 billion a year ago. Net profit in the year rose 26% to HK$2.9 billion or HK$1.22 per diluted share compared to net profit of HK$2.3 billion or HK$0.97 per share a year ago.

Industrial and Commercial Bank of China Limited fell 1.3% to HK$5.66 after the bank is worried about short-term volatility as economic stimuli are withdrawn and about sustaining high growth in the long run.

Li & Fung Limited plunged 9.8% to HK$37.65 after the company was downgraded on the stock to “equal weight” from “overweight” at Morgan Stanley.