[The Wall Street Journal Interactive Edition]
June 9, 1999
Dow Jones Newswires
DJ HK's China-Related Shrs Soar On Mainland Rate Cut
Hong Kong -- China-backed shares listed in Hong Kong are soaring early
Thursday following the People's Bank of China's decision to cut interest
rates on Wednesday.
China's central bank said deposit rates at financial institutions will drop
by an average of one percentage point, while lending rates will be cut by
0.75 percentage point. The benchmark one-year deposit will be adjusted to
2.25%, from 3.78%.
Around 0212 GMT, China Resources Enterprise Ltd. (H.CRE) is up 3.5%, or 40
HK cents, to HK$11.95 on volume worth HK$23.2 million.
China Everbright International Ltd. (H.EVR) has surged 7.9%, or 35 HK
cents, to HK$4.775 on volume of HK$31.8 million.
H-share China Shipping Development Co. (Q.CSD) has soared 5.9%, or 7 HK
cents, to HK$1.26 on volume of HK$23.1 million.
The H-share index, which tracks state-owned enterprises listed in Hong
Kong, is up 5%, or 23.23 points, to 458.84 while the red-chip index, which
tracks mainland-backed companies in Hong Kong, has gained 3.4%, or 32.27
points, to 984.82.
Henri Lui, senior research analyst at Mansion House Securities Ltd., said
H-shares are likely to reap more material benefits from the rate cut due to
their larger exposure to China's lending market.
H-shares led the gainers so far.
Yizheng Chemical Fibre Co. (Q.YCF) has soared 12%, or 15 HK cents, to
HK$1.42. Nanjing Panda Electronic Co. is up 10%, or 5 HK cents, to 54 HK
cents. Beijing Yanhua Petrochemical Co. (BYH) has added 7.9%, or 10 HK
cents, to HK$1.37. Jiangxi Copper Co. (Q.JGX) has gained 7.4%, or 4 HK
cents, to 58 HK cents. Jilin Chemical Industrial Co. (JCC) is up 7.3%, or 4
HK cents, to 59 HK cents.
The move to cut rates is seen as an attempt by the central bank to reduce
corporate borrowing costs, stimulate local spending and enliven the
securities market.
The surge in mainland-backed companies was quickly followed by profit
taking, capping gains on the stocks, said Lui.
But Lui said he expects there will be more upside in the stocks in the
afternoon session after investors locked in immediate profits, because the
level of the rate cut was bigger than the market had expected.
"It will serve as a short-term stimulus to these shares, especially because
these stocks were squeezed earlier by news of China's delayed entry into
the World Trade Organization," Lui said.
(Corrected 0528GMT)
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