The Olympics couldn't end fast enough for investors in the China stock market, which has lost almost 12 percent since the games opened on August 8 in Beijing. After two straight days of modest gains last week, the China stock market has now finished lower in back-to-back sessions - but now analysts say that the Shanghai Composite Index could bounce back to the upside as the government turns its attention from the Olympics to helping the economy and the stock market.
The global forecast for Monday is broadly positive, thanks to a sharp decline in the price of crude oil. Good news out of the U.S. financial sector also helped to allay concerns about the health of the world's largest economy, which was enough to send Wall Street higher. Also, many of the Asian markets are embroiled in lengthy losing streak, which may make share pries very interesting to the bargain hunters.
The SCI finished sharply lower on Friday but well off deeper gains in the morning session. Energy stocks and properties were under heavy selling pressure throughout the session, while the financials were mixed and strength among the airlines helped to cap the losses.
For the day, the index lost 26.49 points or 1.09 percent to close at 2,405.23 after trading between 2,362.09 and 2,426.71 on turnover of 36.35 billion yuan. The Shanghai A-share Index lost 27.78 points or 1.09 percent to close at 2,524.86, while the Shenzhen A-share Index was down 12.91 points or 1.79 percent to finish at 709.57.
Among the decliners, China South Locomotive & Rolling Stock fell 8.60 percent, while Huadian Power International lost 3.37 percent, Huaneng Power International Inc gave up 7.56 percent, China Vanke fell 2.83 percent, China Merchants Property Development lost 4.88 percent, CITIC Securities fell 3.09 percent, Sinolink Securities dropped 3.79 percent, China Petroleum & Chemical Corp (Sinopec) shed 1.28 percent, PetroChina fell 1.53 percent and China International Marine Containers fell 2.04 percent.
Bucking the trend, Shanghai Airlines rose 8.10 percent, while China Eastern Airlines rose 2.42 percent, Industrial and Commercial Bank of China (ICBC) rose 1.47 percent and Pacific Securities rose by the 10 percent daily limit.
Wall Street offers a sharply positive lead as stocks turned in a standout performance on Friday, after a sharp drop in oil prices prompted investors to look for bargains. Strength in the financial sector also contributed to the buying interest on Wall Street.
Investors were encouraged when oil prices pulled back sharply during the day, more than offsetting the price increase in the previous session. The pullback by the price of oil was partly due to a rebound in the value of the U.S. dollar. After ending Thursday's trading up $5.62 at $121.18 a barrel, crude for October delivery closed down $6.59 at $114.59 a barrel.
Meanwhile, state-run Korea Development Bank is considering the acquisition of Lehman Brothers (LEH), according to various reports on Friday. Korea Development Bank, or KDB, reportedly said it is open to mergers or acquisitions of both domestic and foreign companies to cover up its weak areas as the Korean government intends to privatize the company by 2012.
Also, Federal Reserve Chairman Ben Bernanke spoke at the Federal Reserve Bank of Kansas City's Annual Economic Symposium in Jackson Hole, Wyoming earlier in the day, calling the current policy and economic environment "one of the most challenging" in recent memory. "Although we have seen improved functioning in some markets, the financial storm that reached gale force some weeks before our last meeting here in Jackson Hole has not yet subsided, and its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment," Bernanke said.
The major averages saw notable gains throughout the session, closing just below their intraday highs. The Dow closed up 197.85 points or 1.7 percent at 11,628.06, the Nasdaq closed up 34.33 points or 1.4 percent at 2,414.71 and the S&P 500 closed up 14.47 points or 1.1 percent at 1,292.19. For the week, The Nasdaq was down 1.5 percent, while the Dow and the S&P 500 posted weekly losses of 0.3 percent and 0.5 percent, respectively.
In economic news, China's General Administration of Customs said that imports of iron ore increased 18 percent year-on-year in July. The office said July iron ore imports totaled 39.63 million metric tons. For the period January to July 2008, iron ore imports were up 22 percent compared to the like period in 2007. The Administration also said soybean imports in July increased 16 percent over the previous year to 3.5 billion tons. During January to July, soybean imports were up 23 percent. Further, the official report showed that sugar imports fell 89 percent year-on-year to 21,910 metric tons. Imports for the year through July were down 21 percent.
China imported 7.2 percent less cotton in July compared to July 2007. For the year through July, cotton imports were higher by 3.5 percent. The Administration Office said rubber imports were down 13 percent in July over the previous year. Rubber imports for the year through July were up 11 percent.
In corporate news, the government of Australia has given its approval to China-based Chinalco's acquisition of a stake in mining giant Rio Tinto. Australian Treasurer Wayne Swan issued a statement Monday approving the purchase. The Chinese aluminum producer bought a 9 percent stake in Rio in March, and seeks to increase the share to 11 percent. Swan's approval came with the stipulation that it would not increase its holdings in Rio Tinto further without government approval and that it would not seek to appoint a director to the Rio Tinto board unless its stake ever rose to 15 percent or more.
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