Hang Seng Surges 6.4 - Market Update

Market Update Analysis:

Hang Seng Surges 6.4%

Author: 123jump.com Staff
123jump.com
Last Update: 2:08 PM EDT March 25 2008

Stocks in Hong Kong surged after a revised bid for Bear Stearns and better than expected home sales in February lifted U.S. stocks. Hong Kong and Indian stock market averages led the rise in Asian markets. Hang Seng Index rose 6.43% or 1,356.30 to 22,464.52. After the close, ICBC reported a sharp rise in profit. Airline stocks gained on the speculation that newly elected government in Taiwan will open direct flight routes between the country and China.

6:00AM New York, 6:00PM Hong Kong- JP Morgan Chase revised bid for Bear Stearns and strong earnings results spur Hong Kong

Stocks in Hong Kong advanced buoyed by Wall Street gains on news that JP Morgan Chase & Co. has revised its bid for Bear Stearns and on strong earnings by the Industrial & Commercial Bank of China.

Market Sentiment

In Hong Kong trading Hang Seng rose 6.43% or 1,356.30 to 22,464.52, and the China Enterprises index of H shares, or Hong Kong-listed shares in mainland companies, gained 8.22% or 890.80 to 11,727.00. In Shanghai trading, CSI 300 Index increased 1.26% or 48.68 to 3,905.77.

JP Morgan Chase raises its bid for Bear Stearns

JP Morgan Chase & Co. announced on its Web site yesterday that the bank under the amended merger agreement will pay $10 per share for Bear Stearns and immediately acquire 39.5% of Bear Stearns. The deal was voted in favor unanimously by the board of directors at Bear.

Under the revised terms, each share of Bear Stearns common stock would be exchanged for 0.21753 shares of JPMorgan Chase common stock, an increase from 0.05473 shares, reflecting an implied value of approximately $10 per share of Bear Stearns common stock based on the closing price of JPMorgan Chase common stock on the New York Stock Exchange on March 20, 2008.

In addition, JPMorgan Chase and Bear Stearns entered into a share purchase agreement under which JPMorgan Chase will purchase 95 million newly issued shares, or 39.5% of the outstanding Bear Stearns common stock after giving effect to the issuance, at the same price as provided in the amended merger agreement.

The purchase of 95 million shares is expected to be completed on or about April 8, 2008.

Also the agreement with the Federal Reserve Bank of New York to provide $30 billion in special financing with the transaction has also been amended. JPMorgan Chase will bear the first $1 billion of any losses associated from the sale of Bear Stearns assets and the Fed will fund the remaining $29 billion on a non-recourse basis to JPMorgan Chase.

Declining exports to affect China’s GDP growth

Xinhua News Agency reported today that according to the research paper released by the Economic Research Institute of Renmin University, declining export growth precipitated by the current mortgage market crisis in the U.S. may drag GDP to 10.5% this year.

The research further noted that inflationary pressures will remain at elevated levels in China.

China telephone users rose to 927 million

Peoples Daily Online reported today that statistics from the Ministry of Industry and Information indicate China’s telephone users had exceeded 927 million by the end of February.

Of the total phone users, 60% are mobile phone users, and 41.6% of all telecom volume is through the mobile network.

Gainers & Losers

Mobile telecom operator, China Mobile advanced 8% to HK$112.50 after the company announced last week that it added more than 8 million net new subscribers. The second largest mobile operator China Unicom added 1.5 million subscribers and it stock jumped 10% to HK$17.24.

Financial stocks rose after JP Morgan Chase & Co. has hiked its offer for Bear Stearns. Industrial & Commercial Bank of China gained 8.6% to HK$5.20.

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