Fed rate warning hits HK property

THE US Federal Reserve's hint that the days of falling interest rates could soon be over, spooked Hong Kong stocks today, taking its toll on property firms in particular.

The Hang Seng index was down 1.25%, or 151 points, at 11946.8.

Property sector leaders such as Sun Hung Kai Properties and Cheung Kong both fell by more than 1% - Sun Hung Kai to HK$66.75 (£4.69) and Cheung Kong to HK$59. Henderson Land Development was down 3.6% at HK$9.35.

It was the same story at exporters with a big US exposure such as Li & Fung. Stock in the company was down more than 2.5% at HK$12.50.

News that China Eastern Airlines, currently in the process of merging with smaller carriers China Northwest Airlines and Yunnan Airlines, was restructuring its own operations to improve cashflow was greeted favourably.

The Shanghai-based carrier plans to sell 24 aircraft engines to a commercial finance company and then rent 17 of them back for about HK$5.06m.

China Eastern says it will gain HK$3.7m from the deal, and shares rose 6.58% to HK$1.62, despite a decline in China stocks in general.

But the day's action was not so kind to Beijing retail chain operator Wumart Stores, which saw its stock fall 1.6% to HK$12 after it announced that it had bought a 25% stake in a rival, Beijing Chao Shifa, giving it effective control over nearly 60% of the company.

However, Wumart's investors, including the World Bank which holds 3%, will not be too disappointed by today's decline. It is still trading at about double its IPO price of last November.

Harbin Brewery shares soared 46% to HK$4.70 on news that SABMiller is entering a bid battle with Anheuser-Busch for the company, and is to make a cash offer at HK$4.30 a share, valuing the firm at HK$4.31bn.

In Australia, mining stocks, which have overcome jitters earlier in the week about a potential slowdown in China, saved the All Ordinaries index from a decline due to mixed trading among media and banking stocks.

Unlike in Hong Kong, Aussie investors welcomed the Fed's news, and the All Ordinaries was up 0.4%, 14.6 points, at 3413.

Any rise in the greenback as a result is good news for miners down under, and BHP Billiton led the sector up with a 2% hike to A$11.75 (£4.80).

Anglo-Australian giant Rio Tinto added 1.3% to A$32.86. It is now suggesting that far from cooling, demand in China is likely to increase.

Media giant News Corp edged down 0.7% to A$12.60, despite a 1.6% gain in its US-listed American Depositary Receipts, but the banks mostly slipped. National Australia Bank, still gripped by boardroom chaos, saw shares fall 0.3% to A$29.32.

In Singapore, the Straits Times index edged up 2.14 points, 0.11%, to 1867.5 helped by the stellar performance of property group United Overseas Land (UOL). Its stock soared 11.5% to S$2.13, after powerful state investment agency Temasek made an unsolicited offer to buy the stake in UOL owned by United Overseas Bank for an estimated S$726m (£240m) in cash.

But Venture, the island-state's largest contract electronics manufacturer, fell 6% to S$18.40 as BNP Paribas downgraded the stock, saying a company forecast of 27% growth in net profits this year appeared 'too aggressive'.

Japanese markets reopen tomorrow.

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