6:00AM New York, 6:00PM Hong Kong - Hong Kong’s Taxation Institute forecasts fiscal surplus of HK$100 billion. CITIC and Bear Stearns will reduce the stock price of investment in each other and raise stakes in each other.

Market Sentiment

In Hong Kong trading the Hang Seng Index rose 3.7% or 852.13 at 24,021.68, and the China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, gained 4.7 % or 601.61 to 13,550.99.

Stocks gained after Japan’s fourth quarter GDP growth beat analyst estimates and on an unexpected rise in the U.S. retail sales in January.

Daily turnover on main-board was HK$94.3 billion compared to HK$82.5 billion on Wednesday.

Fiscal Surplus Projected to Rise

The Standard news online reported today that the Taxation Institute of Hong Kong said it forecasts fiscal surplus for the current financial year to rise to a record HK$100 billion from the current HK$86.8 billion.

The institute also urged the government to provide tax relief, retain stamp duty and broaden the tax base after """"the biggest bonanza year"""" since 1999.

The institute proposed a one year waiver of taxes for both residential and non-residential premises for the fiscal year beginning in April, subject to a maximum of HK$5,000 per quarter per unit.

Other proposals that were made by the institute also include broadening the margin tax band width to HK$40,000 from HK$35,000. The institute projected that stamp duty contribution may be as high as HK$40 billion

Bear Sterns and CITIC to revise deal

The China’s People Daily reported today that Bear Stearns and CITIC Securities will review a share swap deal and increase the stake in each other by lowering convertible prices of each share without changing the fixed investment scale.

After the price cut CITIC’s stake in Bear Stearns will increase from 6% to 9.9%, while the U.S. company’s 1 billion debt will translate into a 2.5% equity in CITIC, which will eventually rise to 7.5%.

The deal is still subject to regulatory approval.

Gainers and Losers

Shipping lines advanced after the Baltic Dry Index, which is used to gauge freight charges, gained. Reuters news also reported that negotiations for this year’s iron ore supply were at an advanced stage.

COSCO increased 10.1% to HK$23, Pacific Basin Shipping Limited gained 5.5 % to HK$12.68, and China Shipping Development Co Limited spiked 10% to HK$23.15

Commodities stock Chalco edged up 9% to HK$13.36 on the speculation that its parent company China Aluminum Company and the U.S. ally Alcoa plan to raise their stake in Rio Tinto to 20% from 12%.

Angang Steel spiked 10.8% to HK$16.56 on speculation it will benefit from the rebuilding effort in China after snowstorms caused economic damage worth $15 billion.

Also Alibaba.com rose 4.7% to HK$19.96 after Baidu.com said fourth quarter profit gained 79% on the year to Rmb219.8 million.