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[B]Chinese Yuan Continues Advance Against Dollar Amidst Poor Data[/B]
Even as risk aversion was the daily theme, the Chinese yuan continued to be in high demand against the US dollar and British pound. However, against the Euro, the support wasn?t as nearly as strong. With weakness in both US and British markets, the yuan climbed to 7.5565 against the greenback and 15.21 against the pound sterling. Helping to keep dollar bulls at bay, at least for now, were the consumer confidence figures this morning in New York. Expected to be relatively positive, the confidence figures fell far below estimates, the most in two years, as consumers were concerned over the recent global equity rout on subprime concerns. Subsequently, good news surrounding China Life helped in supporting the Yuan against the US dollar.
[B]China[/B][B] Life Shares Skyrocket On Record Profit[/B]
China Life stock, the world?s largest insurer by market value, vaulted higher to a record in overnight trade as the company reported first half profit that overshadowed analyst estimates by a whopping 40 percent. Although based in Beijing, the company?s stock on the Hong Kong exchange has garnered plenty of attention, rising 5.7 percent for the day to a market capitalization of almost $200 billion. The reason? According to the company?s release, China?s Life?s net income more than doubled to an impressive $3.1 billion against estimates that had expected far less in productivity. However, notably, the gains were on the backs on soaring returns in the stock market and not internal growth. The fact kept some momentum at bay as investors preferred solid growth to one off gains in the equity markets. Nonetheless, the day?s advance shows the potential China companies can present, which helped to lift the stock higher to HK$37.15 at the close.
[B]Pudong Relationship Aims To Start China Fund[/B]
In attempts to capture investor appetite for equity market speculation, Axa SA and Shanghai Pudong Development Bank are set to create a fund that will be aimed at investment opportunities in the world?s fastest growing economy. The asset management venture under Axa Spdb Investment Managers Co. is looking to take advantage of rising stock market valuations as more and more households look to increase their risk taking ability. This is a different environment compared previous beliefs that building a savings nest egg was the proper approach. Notably, however, with growing institutional investment, the landscape could certainly change. The index has recently seen growth where institutional investors and fund managers have comprised a whopping 44 percent of the stocks traded on the exchange.
[B]Regional Equity Markets Pullback on Profit Taking, Hong Kong Drops From Record [/B]
Hong Kong?s Hang Seng index dropped from a record yesterday following a report that US growth may be in jeopardy. The decline was exacerbated as profit taking by investors and risk aversion crept in to the market environment. All in all, the benchmark index dropped by 213.97 points to close lower by 23,363.76. Europe?s biggest bank helped in leading decliners on the day, as shares lost HK$1.30 to close at HK$139.80. Earnings in North America for the bank dropped a whopping 35 percent to $2.44 billion as loan defaults made a considerable dent on previously higher amounts. Stocks in Singapore subsequently dropped on the same notion as shares on the region?s Straits Times Index closed down for the day. Dipping 45.44 points to 3,343, the index was led lower by losses on Wall Street and concerns that the subprime mess isn?t completely out of the picture.
[B]Written by: Richard Lee, Currency Strategist[/B]