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TAKING STOCK – STI falls on US problems, weak yen; China New Town sinks

SHARE prices tumbled across Asia, as deepening credit woes in the United States and renewed weakness of the greenback against the yen prompted traders to liquidate positions before the weekend.

Yet, for all the regional bloodletting, local investors took some solace that the fallout in Singapore was not as severe as in other markets.

The Straits Times Index (STI) fell 36.63 points, or 1.05 per cent, to 3,440.96, after plunging by as much as 71 points at one stage.

Other markets did not get off as easily, though. Hong Kong’s Hang Seng Index was down 3.95 per cent, hurt by concerns that China might again raise interest rates, while Tokyo’s Nikkei 225 Index lost 1.6 per cent due to fears a US slowdown might hurt the Japanese economy.

The key concern here was the striking drop in investor interest in equities as prices swung down. Overall, market volume fell to just 1.82 billion shares worth $2.11 billion.

‘Investors are moving to the sidelines and taking a wait-and-see attitude, given the uncertainties caused by the mortgage crisis in the United States,’ said a dealer.

While that was the big picture, there was an equally compelling drama going on among China plays.

Jittery traders dumped recently-listed China New Town Development on concerns its project in China probably did not receive the authorities’ blessing.

China New Town shed 12.1 per cent to 69 cents on a hefty volume of 79.6 million shares. It has now lost 16.8 per cent since it listed on Wednesday.

A China New Town spokesman said it was not the company’s policy ‘to comment on specific share price performance and market speculations’.

One dealer said investor confidence was shaken by a belated realisation that a risk factor disclosed in China New Town’s prospectus might cast a serious pall on its business prospects.

By listing here, China New Town is now regarded on the mainland as a foreign firm. This means it must get the approval of China’s Commerce Ministry for any investment that exceeds US$100 million (S$144.8 million) – a rule that applies to a 1.17 billion yuan (S$228 million) project mentioned in its prospectus.

The firm had been caught in limbo, as the Shanghai branch of the Commerce Ministry did not send its proposal to Beijing after approving it.

‘As the transfer is an internal government procedure, we are not in a position to seek clarification or confirmation,’ it said.

The plunge in China New Town rippled across other China plays, with recent losers continuing their declines.

 

Source: The Straits Times 17 Nov 07

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