Posted on 06/12/2008 2:34:43 AM PDT by TigerLikesRooster
Shanghai index drops below 3,000
By V. Phani Kumar, MarketWatch
Last Update: 12:02 AM ET Jun 12, 2008
HONG KONG (Menafn - MarketWatch) -- Chinese shares in Shanghai suffered big losses Thursday to pull the benchmark stock index down to less than half its value at the past year's record high. The drop came in spite of economic data, which showed that inflation eased in May, as investors worried the relief was only temporary.
Other markets in Asia tumbled as well, with Japanese shares dropping as fears about high oil prices and rising inflation weighed down real estate companies such as Mitsui Fudosan Co., while exporters such as Toyota Motor Co. slid on a strengthened yen.
China Petroleum & Chemical Corp. and PetroChina Co. fronted an across-the-board decline in Hong Kong, on fears the Chinese refiners' losses on fuel sales could widen. Australian stocks dropped, as shares in Babcock & Brown suffered a sell-off on concerns sharp erosion in its market value could trigger a review of the company's debt by its lenders.
"People are expecting tougher times ahead, as different governments try and battle inflation," said Howard Gorges, vice-chairman at South China Brokerages. "I think up until a month ago, people were of the view that after the initial financial crisis, the glass was half-full. Now, they have turned pessimistic and the glass is definitely more than half-empty."
On mainland China, the Shanghai Composite lost 3.3% to 2,925.94, dropping below the psychologically-important 3,000-point level for the first time in more than a year. At its latest level, the index has lost nearly 45% of its value in 2008 so far, and more than half its value from its record high of 6,092.06 in October.
The decline came in spite of data, which showed that the country's consumer price index rose 7.7% in May from the year-ago month, compared with an increase of 8.5% in April. See full story
The Nikkei 225 Average tumbled 2.3% to 13,861.70, after rising as much as 1.2% in the previous session, while the broader Topix index gave up 2.1% to 1,360.61.
Shares of Mitsui Fudosan dropped 3.4%, while Mitsubishi Estate Co. sank 3.5%, extending their losses. Mitsui Fudosan shares fell in the previous five sessions, while Mitsubishi Estate's stock declined during each of the last seven sessions.
In Hong Kong, the Hang Seng Index fell 2.4% to 22,776.44, while the Hang Seng China Enterprises Index lost 3.2% to 12,303.23.
Australia's S&P/ASX 200 dropped 2.3% to 5,343.30 and New Zealand's NZX 50 index slipped 1.1% to 3,449.96, while South Korea's Kospi shed 1.8% to 1,750.41. Taiwan's Weighted index gave up 2.2% to 8,160, while Singapore's Straits Times index lost 1.9% to 2,988.51.
Regional detail
Shares of Babcock & Brown slumped in Sydney, on concerns a sharp recent fall in the stock could trigger a review of the company's debt by its lenders. According to media reports Thursday, the company's lenders had the option of reviewing debt facilities, if Babcock's market capitalization fell below A$2.5 billion ($2.38 billion).
At its recent share price of A$7.92, 16.8% lower than the previous close, the company had a market value of A$2.64 billion, according to FactSet data. Thursday's decline came on top of an 8.6% fall in its shares on Wednesday and 6.6% drop on Tuesday.
Financials dropped across the region after an overnight decline on Wall Street, with Macquarie Group sinking 5.9% in Sydney and Industrial Bank of Korea losing 4.5% in Seoul, while Mizuho Financial Group MFG dropping 3.5% in Tokyo. HSBC Holdings HBC lost 2% in Hong Kong, while DBS Group Holdings DBSDY gave up 2% in Singapore.
Shares of Daiichi Sankyo Co. ended the Tokyo morning session 0.3% lower, reversing direction in the broad market weakness. The stock had risen more than 2% earlier in the day, after the Japanese company Wednesday announced an agreement to purchase a majority stake in India's largest generic drug maker, Ranbaxy Laboratories, for up to $4.6 billion.
Among exporters, shares of Toyota TM dropped 2.2% and Sony Corp. SNE stock lost 2.8%, as the yen strengthened against the U.S. dollar.
In Asian currency trading, the U.S. dollar bought 107.21 yen, compared with 107.44 yen late Wednesday. The greenback changed hands for 106.87 yen in late New York trading.
July crude-oil futures gained as much as 16 cents to $136.54 a barrel in electronic trading, after jumping $5.07 a barrel to $136.38 on the New York Mercantile Exchange.
On Wall Street, the Dow Jones Industrial Average $INDU fell 205 points to 12,083 and the S&P/ASX 200 $SPX lost 22 points to 1,335, while the Nasdaq Composite $COMPX gave up 54 points to 2,394.
Ping!
High oil prices make shipping products halfway around the world much more expensive, making local products more competitive. If you’re in business to ship products halfway around the world, which China very much is, any forward-thinking person will realize that the long-term consequences of high oil prices are not good.
Absolutely. But it’s also why the Chinese are a) drilling for oil like crazy; b) starting an unprecedented number of hydroelectric plants, and c) modernizing with energy-saving devices (i.e., labor saving), which means they are d) outsourcing :)
Overall, Chinese people are very nice in many respects, however, their government is a little to controlling.
China will suffer the growth pains of capitalism like the US does on a routine basis.
Don’t forget developing CTL (coal-to-liquid) plants. Something we should be doing more of. It’s interesting that some of our work there is being done not by DOE, but by the Air Force. They want to make sure they can continue flying.
U.S. Air Force Plans Coal-to-Fuel Conversion Plant
http://www.foxnews.com/story/0,2933,340923,00.html
That’s the way it always is: the military will ensure it has energy, just as the U.S. Navy ensured it had coaling stations in the 1800s.
Not that much more expensive. At 10 cents per lb (back when oil was in the 60's) - when you're shipping an entire refrigerated container-load - it just doesn't make that much difference. The salary gap between China and the US is simply too salary. What it does do is make low income countries close to the US a lot more attractive as sites for manufacturing facilities. Nicaragua, Haiti (if it ever becomes a peaceful place), and other countries in the Americas are now contenders despite many having higher salaries than China.
Depends on a lot of factors, bulk, weight, and labor hours being obvious primary ones. Your point is well take, and “local” could mean “regional, not halfway around the world”.
Heck, if Mexico weren’t a semi-lawless hellhole, it might be more of a contender.
Mexico will make a comeback. Average annual salaries in China range from about $150-$400 a month. Mexico is at roughly $400. (Nicaragua already has lower wages).
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