China scrips at 10-yr low

STOCK REPORT

Asian stocks fell from a record. China's shares tumbled the most in 10 years on concern the Chinese government may introduce measures to cool the stock markets as the National People's Congress meets next week.

China Vanke Co, the nation's biggest property developer, and China United Telecommunications Corp., which controls the country's second-largest mobile-phone operator, both plunged by the 10 percent daily limit.

"This is the first day when the bears on the index have won,'' Liu Yang, who manages Atlantis Investment Management (H.K.) Ltd.'s $421 million Atlantis China Fund. "It's very simple to me. After very good returns, the market just wants to take a rest by using any excuse to sell.''

China Mobile Ltd led Hong Kong's Hang Seng Index 1.8 per cent lower on concern spending on a high-speed wireless network will exceed investors' expectations. Sumitomo Mitsui Financial Group dropped on speculation a rate increase by the Bank of Japan last week won't be enough to boost profits.

The Morgan Stanley Capital International Asia-Pacific Index lost 0.2 per cent to 148.26 as of 7:45 p.m. in Tokyo. It closed at a record 148.51 yesterday. Its relative strength index, based on a 14-day moving average, rose to 74.9 yesterday, above the 70 threshold some investors use as a trigger to sell shares.

China's Shanghai and Shenzhen 300 Index slumped 9.2 per cent from a record high. It had jumped 13 per cent in the past six sessions. The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, plunged 8.8 percent, the most since February 18, 1997.

Japan's Nikkei 225 Stock Average lost 0.5 per cent. Benchmarks in Australia and South Korea dropped from all-time highs. All other markets fell, except in Taiwan which was little changed.

Further Measures?
China Vanke lost 1.58 yuan to 14.26. United Telecommunications declined 0.54 yuan to 4.89. Baoshan Iron & Steel Co, China's biggest steelmaker, slid 10 per cent to 9.03 yuan. Citic Securities Co., China's biggest brokerage, dropped 9.7 per cent to 36.21 yuan, its biggest drop since January 17.

Investors are concerned China may introduce further austerity measures around the time government leaders meet for a meeting of the National People's Congress, China's legislature, which starts March 5. The Chinese government said this week the State Council had approved a special task force to clamp down on illegal share offerings and other banned activities in the stock markets.

"China stocks are under attack because investors are cautious ahead of the NPC,'' said Kenny Tang, associate director of research at Tung Tai Securities Co. in Hong Kong.

Last month, China's benchmark tumbled 11 percent in four days after Cheng Siwei, vice chairman of the NPC, said shares were overvalued. The Shenzhen and Shanghai index has gained 135 percent in the past 12 months.

"The market's very sensitive as it's been trading at record levels and some stocks are considered overvalued,'' said Fan Dizhao, who helps manage the equivalent of $1.8 billion with Guotai Asset Management Co in Shanghai. "Investors are nervous about recent rapid gains and are not convinced further share-price increases can be sustained.''

Mitsubishi Estate Co, Japan's No. 2 property developer, slid 3.1 per cent to 3,790 yen. The shares climbed 27 per cent this year to yesterday's close and reached a record of 4,000 yen on February 23.

Westfield Group, the world's biggest owner of shopping malls, slid 2.2 per cent to A$22.26. The shares have gained 6 per cent this year, compared with 2.5 per cent gain in the S&P/ASX 200 Property Trust Index. Westfield said today that second-half operating profit gained 7.6 per cent.

BlueScope Steel, Australia's biggest steelmaker, dropped 1.5 per cent to A$9.70. Brokerages including Citigroup Inc. and JPMorgan Chase & Co cut their recommendations on the stock, citing valuation concerns. BlueScope shares have gained 13 percent this year.

"There are signs of overvaluation in the market,'' said Paul Xiradis, who helps manage $6.9 billion at Ausbil Dexia Ltd. in Sydney. "Certainly you're seeing brokers coming out and downgrading the likes of BlueScope, and the property sector including Westfield has been at full value for some time.''

Hana Financial Group Inc., South Korea's fourth-largest financial services company by assets, lost 3.5 per cent to 52,500 won. The stock has advanced 7.4 per cent this year, compared with 1.4 per cent increase in the benchmark Kospi index.

China Mobile, the world's largest cell-phone operator by users, fell 2.9 per cent to HK$74.90. China's investment in third- generation mobile-phone services may more than triple next year to 100 billion yuan ($12.9 billion), the China Securities Journal reported today, citing a report by the State Information Center.

China Mobile Communications Corp, the parent of Hong Kong-listed China Mobile, may offer 3G services from the end of October, the Beijing-based Economic Observer newspaper reported on February 12, citing an unidentified company executive.

China-related stocks in Hong Kong also fell as the Shanghai and Shenzhen markets plunged. China Construction Bank Corp, the nation's fourth-biggest lender, slipped 2.8 per cent to HK$4.53, its biggest drop since January 9.

The Hang Seng China Enterprises Index, which tracks the so- called H shares of 37 mainland companies, fell 3.1 per cent to 9586.23. The measure surged 94 per cent last year.

"People are worried that more tightening measures may come out,'' said Mona Chung, who helps manage about $950 million at Daiwa Asset Management in Hong Kong. "Given the weakness in China's stocks, and the fact that H shares have rallied, there's a bit of pressure'' on Hong Kong-listed Chinese shares, she said.

Sumitomo Mitsui, Japan's No 3 bank, dropped 2.5 per cent to 1.16 million yen. Mitsubishi UFJ Financial Group Inc, the biggest, fell 1.3 per cent to 1.49 million yen.

Bank of Japan Governor Toshihiko Fukui said on February 23 that interest rates will stay ``very low'' following the bank's decision to raise borrowing costs two days earlier.

The Topix Banks Index climbed 7.9 per cent in eight trading sessions prior to Fukui's comments on optimism higher interest rates would allow them to boost lending margins.