Economic news sees export, retail stocks flounder
Export and retail stocks slumped yesterday as local investors cut back their exposure to the global market after mounting evidence from overseas economies this week suggesting an economic slowdown had spread beyond the United States.
To add to the gloom, Foxconn International Holdings, the world's largest contract manufacturer of mobile telephones, said last night its first-half profit was expected to decline because of the change in product mix, rising operational costs, increased long-term investment in research and development and production facilities, as well as higher income tax expenses.
Investors were beset by negative second-quarter reports showing Europe's economy shrank 0.2 per cent from the first quarter and the Japanese economy, which is the world's second-largest, contracted 0.6 per cent. To top it off, US inflation figures for July surged twice as much as was exposed by forecasters.
'With the macro news about Europe, Japan, and the US, it is very likely export-related counters are going to be hard hit in the coming months,' said Core Pacific-Yamaichi International research director Alex Tang Yee-yuk.
The sell-off began in earnest yesterday as Foxconn slid 9.42 per cent to HK$7.69, outpacing the decline of the Hang Seng Index yesterday.
Esprit Holdings, a global retailer, and Li & Fung, a supplier to Wal-Mart stores, slid 2.48 and 0.83 per cent respectively to finish down on the week. Container terminal operator Cosco Pacific dropped 1.59 per cent.
Yue Yuen Industrial (Holdings) rounded out declines among retailers yesterday, losing 1.42 per cent. The largest maker of sports shoes in the world still added 4.77 per cent on the week, however, thanks to an Olympic bump which propelled it earlier in the week to its first four-day winning streak since May.
'People are rushing for sports goods and as one of the largest sportswear producers in China, they will definitely benefit,' said Kim Eng Securities analyst Shadow Lau.
But the overall index did not benefit, falling 1.09 per cent or 232.13 points yesterday to 21,160.58, its lowest since March. It declined 3.31 per cent on the week as market soured after a series of analyst downgrades and earnings disappointments.
'All in all, on the macro side you got hammered and fundamentally you look at the corporate earnings and you have downgrades and downward revisions and these two forces are going drive stock prices lower,' said Mr Tang.
