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China markets retreat but defence and textiles up

21st Jan 2009, 12:50 pm China markets retreat but defence and textiles up

China's stocks retreated as the earnings outlook dimmed, although defence and textile shares gained on news of government support. The Shanghai Comprehensive Index retreated 0.46 percent to 1985.02. The Hang Seng Index dropped 2.9 percent to 12583.63.


Suning Appliance Co.(002024,SZ), China's biggest electronics retailer by market value, dropped 9.1 percent after cutting its 2008 earnings growth forecast from 60 percent to 40 percent, seeing a historical trading volume. Profit almost doubled to RMB 1.47 billion (USD215 million) in 2007.


CNOOC (0883, HK) declined 2.58 percent after it announced its plan to increase production yesterday. It will start 10 new projects in 2009, pushing its total production to around 230 million barrels. Sinopec (600028,SH; 0386,HK) dropped 1.77 percent on its Shanghai trading and 4.1 percent on its Hong Kong trading.


Defence and aerospace shares gain on speculation of increased military spending


China released its defence white paper yesterday with plans to modernise the People's Liberation Army with new equipment and technology. China Dongfanghong Spacesat Co.(600018,SH), which makes satellites, surged 8.83 percent. Long March Launch Vehicle Technology Co.(600879,SH), a maker of equipment for China's space program, rose 5.91 percent. China's defense budget rose 17.5 percent last year,but the total amount is only 7.51 percent of the US defense budget.


Textile shares advance on stimulus package


China's state council is approving its stimulus package for the textile industry after having already approved packages for auto and steel industries last Wednesday.


Huanfang Textile Co.(600273,SH), a major cotton textile producer, surged to its 10 percent daily limit. Sunvim Group Co.(002083,SZ), China's largest fine towel producer, climbed 7.93 percent.


The textile industry has perhaps been the most affected by the global crisis as markets withered both domestically and overseas.


Happy stock of the day

China North Optical-Electrical Technology Co.(600435,SH), wins hands hands-down as stock of the day, by being a producer of not only textile machinery but also military equipment. It surged to its 10 percent daily trading limit.


It's also the first company to release its annual report for 2008. Net profit of the company increased 34.4 percent last year. Stock price of the company has increased 127 percent since last November.


The company had been experiencing losses until the third quarter of 2008, when it acquired the military business from its largest shareholder in a stake purchase.


Alibaba raises workers' salaries, freezes management pay


Alibaba Group Holding Ltd., which owns China and the world's largest business-to-business online trading platform, will freeze senior managers' salaries this year while giving most of its 12,000 workers a pay increase. The price of Alibaba.com (1688, HK), a subsidiary of the group, dropped 2.17 percent today .

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