HONG KONG (Thomson Financial) - Hong Kong shares are expected to open higher
on Monday, tracking gains on Wall Street on Friday as investors started to
believe the impact of the global credit crisis on the U.S. economy may not be as
severe as earlier feared.
The mood on Wall Street was upbeat after the latest non-farm payroll data
showed 20,000 jobs were lost in April, a far better result than an expected loss
of 75,000 jobs.
"U.S. stocks ran up a bit on Friday but more than that rally, improved
sentiment across regions should help the local market scale higher today," said
Peter Pak, vice president with BOCI Research.
On Friday, Dow Jones Industrial Average closed up 48.2 points or 0.4 percent
at 13,058.20. For the week the Dow gained 1.29 percent, the S&P 500 index ended
up 1.15 percent and the Nasdaq composite index rose 2.23 percent.
Also spreading more cheer were the latest efforts from central banks in the
United States and Europe to ease the strains in financial markets. The Fed said
it was increasing the size of its credit auction facility by 50 percent to $150
billion.
Additionally, the Fed, the European Central Bank and Swiss National Bank
have agreed to increase their currency-swap arrangement by two-thirds, allowing
European authorities to provide more dollars to their banks.
On Friday, Hang Seng Index closed up 485.67 points, or 1.89 percent, at
26,241.02. The benchmark index closed at a three-and-a-half month high despite
the local banks' decision not to follow the U.S. Fed/Hong Kong Monetary
Authority's quarter-of-a-point rate cut.
The index gained 2.8 percent over the week and is now just 5.7 percent lower
than its end-2007 level.
BOCI's Pak expects the HSI to run up 1 percent today with a likelihood of
consolidation at the 26,500 level.
Most banking stocks closed higher on Friday on hopes that last week's rate
reduction could be taken as a signal of a pause in the Fed's aggressive
rate-cutting strategy.
Stocks to watch today include Angang Steel after the Financial Times
reported that the mainland's second-largest steel maker was in talks with
ArcelorMittal for a possible tie-up.
Indian billionaire Lakshmi Mittal, who is the CEO and owner of
ArcelorMittal, is reported to have proposed to buy a 25 percent stake in the
Chinese government-controlled steel company. Angang chairman Zhang Xiaogang
turned down Mittal's proposal but told FT he would be interested in allowing the
Luxembourg-listed company a smaller 1-2 percent holding in Angang.
Shares in China Petroleum & Chemical Corp and Petrochina may come under
pressure following Friday's spike in oil prices. Crude oil jumped $3.80 a barrel
to $116.32 on May 2 on fears of disruption to production in Nigeria. The price
had been dipping on the dollar's increasing strength against the euro.
Chinese refiners are affected by record-high oil prices as they are unable
to pass on the increased cost to their customers in China's regulated oil price
environment.
CNOOC, China's largest offshore oil producer, stands to gain from rising
international crude oil prices because of its position as a pure upstream
player.
Airline stocks may also slip, with more expensive jet fuel putting pressure
on profits.
Local property stocks which rallied sharply on Friday on hopes that Hong
Kong lenders will follow the Fed rate cut may correct today.
"Personally I don't see any reason for the property stocks to have rallied
the way they did on Friday," said BOCI's Pak.
($1 = HK$7.80)
parvathy.ullatil@thomsonreuters.com
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pu/nt
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