Chinese Shares Rebound, Policy Officials Head To Washington


Hong Kong
Inflation Slows to 1.3%

Inflationary pressures in the Hong Kong economy rose less than expected for the month on the heels of waived property taxes. Announced in February, the waived taxes helped to mitigate rising housing costs, allowing prices to advance at a slower pace. For the month of April, consumer prices rose 1.3 percent on the annualized figure, lower than the 2.1 percent pace that was forecasted by analysts. The dip in the report remains in line with previously printed economic figures, alluding to a plausible medium term slowdown in the Asian tiger economy. Both Hong Kong?s retail sales and gross domestic product figures landed below estimates, attributed to slower US growth and import demand.


Chinese Shares Rebound, Policy Officials Head To

To the surprise of market participants,
stocks quickly recovered from the almost 3.5 percent gap downwards in the overnight. Ending the day higher by as much as 55 points to close at 3,831.44, the CSI 300 Index bounced back after equity markets reacted negatively to the triple whammy seen on Friday. Late last week, the People’s Bank of China tightened monetary policy by implementing three proactive measures, compared to the usual one policy adjustment in order to curb foreign investment and hints of an overheated economy. Incidentally, helping to support stocks higher were insurance companies. With rate tightening policy boosting the value of safer assets offered to insurance company investments, the sector was bolstered with notable advances in Ping An Insurance, China’s second largest. Shares of Ping An rose 1.18 yuan to 63.38 as China Life Insurance rose 0.08 yuan to close at 39.10. Subsequently, traders will be focused on the upcoming meeting between Chinese officials and US Treasury Secretary Henry Paulson this week in
Washington. Should US policy makers notably back down from recent sanctions at the Strategic Economic Dialogue, the recent decision by the Chinese may be perceived as nothing but appeasement and not sound economic policy.


Growth Expands Better Than Expected, Advances 7.6 Percent

Bucking the overall downtrend of economic data in the past quarter, Singapore’s economy advanced by 7.6 percent in the first quarter of the year. Amid expansion in construction activity, the report was widely optimistic given the recent massive declines in exports for the city state. As a result, government officials raised 2007 forecasts higher to as much as 7 percent lending some interim strength for the underlying economy. Incidentally, attributed to the higher rate of growth, was a boost in domestic spending. Supported by a rising stock market, which has hit numerous record closes in as many days, and a bolstering real estate market, consumers are confident in spending hard earned income. However, weakness in manufacturing continues to persist, leaving some to wonder how long the consumer will remain resilient in supporting the overall economy. Nonetheless, the current rate of growth and benign level of inflation convinced the Monetary Authority of Singapore to keep the current policy in place. Stating no change to its exchange rate policy, Singapore’s central bank said that given circumstances, it won’t seek to influence interest rates at present. In a statement released in the overnight, policy makers look to “reiterate that there is no change in MAS’s exchange rate centered monetary policy regime, recent movements reflect market forces.” The decision kept some SGD bidders out of the market, as the Singapore dollar now trades slightly lower at 1.5261.


Hong Kong
Stock Markets Seeing Green

Regional Asian stocks were also higher following on the heels of
. Singapore’s Straits Times
index jumped 2 points to close at 3,519.49 while Hong Kong’s Hang Seng advanced 23 points to close at 20,927.75.