China warnings hitting home
SOMETIMES messages need to be delivered several times before their impact hits home. China officials have been saying for several weeks now that their red-hot economy is too much of a good thing, and they are trying to douse the fiercest flames.
The statements, coupled with policy moves to damp the most overheated sectors, have undercut China-linked shares in Hong Kong for several sessions. But the selling became more widespread today amid concern about the broader impact of the cooling-off.
Hong Kong was in the firing line as the Hang Seng index slid 151.49 points or 1.3% to 12,103.82. Every member of the 33-strong benchmark lost ground, led by Lenovo, China's top-ranked PC maker. It slumped 10 cents or 4% to HK$2.38.
The Hang Seng China Enterprises index - which tracks Hshares - was pummelled by 208.36 points or 4.9% to 4055.05. Among the hardest hit, was the Aluminium Corp of China, which fell 40 cents or 8% to HK4.55.
The trigger for the weakness were remarks by China Premier Wen Jiabao, speaking yesterday ahead of a 10-day visit to Europe. 'We need to take effective and very forceful measures to resolve those problems as soon as possible,' Wen said.
The thrust of the statement is far from new, although the tone is more urgent. Traders reacted badly in US and European trade, selling down resource shares which have been pumped up on the China story. That in turn set the stage for today's weakness in Asia.
'Stocks, gold and Treasuries were down big,' ING told investors. 'Alcoa and US Steel were hit hard on worries over a hard landing in China.'
Just days ago the World Bank warned: 'The real risk to Asia comes not from slower growth in China but from a hard landing, which will take skilful and co-ordinated policymaking to avoid.'
Brokers also said that the crystallising concern about China comes hard on the heels of worries about the timing and magnitude of interest rate rises in the recovering US economy. The bad news, therefore, has come on two fronts.
Among the casualties in Hong Kong were travel, banking and property stocks as a less-feisty Chinese economy is bad news for Hong Kong and much of the rest of the Asian region.
Cathay Pacific Airways dropped 40 cents or 2.8% to HK$14.10. Earlier this month the airline traded at HK$16.75.
Developer Cheung Kong slid HK$1 or 1.7% to HK$59.75, while rival Sun Hung Kai Properties dived HK$1.75 or 2.6% to HK$66.50.
Global lender HSBC backtracked HK$1.50 or 1.3% to HK$114.50 and Standard Chartered traded at HK$123, down by HK$2.50 or 2%.
The same downdraft hit Australian stocks too, with miners reeling from the hardest blows.
BHP Billiton was shaved 34 cents or 2.9% to A$11.58; Rio Tinto was down 82 cents or 2.4% to A$32.33 and WMC Resources fell 22 cents or 4.5% to HK$4.71.
Recovering winemaker Southcorp was among the few counters that avoided the sell-down, rising one cent or 0.3% to A$3.53. The All Ordinaries index was 44.1 points lower at 3406.3 points, a retreat of 1.3%.
Singapore shares were marked lower in line with the region. The Straits Times index eased 20.68 points or 1.1% to 1827.08. State-linked Singapore Airlines weakened 20 cents or 1.8% to S$10.70.
Markets in Japan were shut for a national holiday.
