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Japan, China Shares Down on Profit-Taking

CNBC with wires
Friday, 25 Dec 2009 | 1:36 AM ET

Japan's benchmark Nikkei average closed down 0.40 percent at 10,494.71 on Friday, while the broader Topix shed 0.47 percent to 909.39.

Traders said profit-taking weighed on the markets.

But the Nikkei could once again test higher ground when foreign investors, many of whom are away on the holiday break, return early next year.

Toyota, Canon shares down. Shippers also down with Mitsui OSK Lines down 1.64 percent.

Toyota's Chinese unit said Thursday it will from December 30th recall 43,023 vehicles due to possible engine oil leakage, the Nikkei reported.

The recall affects four models, including the upscale Lexus ES350, but does not apply to vehicles manufactured in China and exported to Japan.

The reason for the recall is that sulfur in the fuel is damaging the engine's oil hose, raising the risk of engine oil leakage, the report said.

China's key stock index edged down 0.39 percent by midday on Friday as caution over new share supplies was heightened by the unexpected announcement of an IPO by Anhui Xinhua Media, although investors snapped up nine new listings including Shenzhen Gas Corp.

The Shanghai Composite Index ended the morning at 3,140.971 points but held firmly above the key 125-day moving average, now at 3,099, indicating market sentiment remained stable amid signs of China's steadily improving economy and prospects for strong corporate earnings.

Caution re-emerged after Anhui Xinhua Media said on Friday it would launch an initial public offering next week for a listing on the Shanghai Stock Exchange, raising 712 million yuan ($104 million) mainly to expand its sales network.

The IPO announcement just as the year is drawing to a close signaled that Beijing is continuing its campaign to clamp down on asset prices, with steps including adding share supplies and abolishing certain preferential property policies.

"The overall policy is for the stock market to rise only steadily and for the property market to fall, also steadily," said Zheng Weigang, head of investment at Shanghai Securities. "And a quick stock market expansion suits that policy goal."

The government has orchestrated a steady expansion of the share supply in the market since the middle of this year, when the Shanghai index's heated rally took year-to-date gains to a peak of 91 percent in early August.

Chinese companies have raised more than 200 billion yuan from the mainland markets since the China Securities Regulatory Commission lifted a nine-month ban on stock IPOs in June.

The annualized pace of the market's expansion has approached the record in 2007, when the authorities pushed 460 billion yuan worth of IPOs onto the market to help cool a bull run that boosted the Shanghai index six-fold in two years.

NEWCOMERS SIZZLE

Losing Shanghai A shares narrowly beat losers on Friday by 428 to 419, while turnover fell to 53 billion yuan from Thursday morning's 60 billion yuan.

Shenzhen Gas, a liquefied gas distributor that listed a 900 million-yuan IPO in Shanghai on Friday, jumped 115 percent to 14.94 yuan by midday from its IPO price of 6.95 yuan, easily beating an average analyst forecast of only 8.5 yuan and betraying clear signs of heavy speculation in new shares that has been common in China's nascent stock market.

Shenzhen Gas is now valued at 100 times its 2008 earnings compared with an average historical price earnings ratio of 38 times for China's power utility counters. Its forecast PE for 2009, based on analysts' estimates, reached 79 times compared with a sector average of 33 times.

A second batch of eight companies debuting on China's Nasdaq-style ChiNext market in Shenzhen on Friday surged between 41 and 78 percent, with software maker Beijing Supermap Software the biggest gainer with a jump to 34.86 yuan from its IPO price of 19.60 yuan.

Buoyed by the strong performance of the newcomers, China Shipbuilding, which began trading in Shanghai last week, bucked the market's downtrend to rise 0.93 percent to 7.61 yuan and was the morning's most actively traded stock.

Leading the losers was chemical raw materials maker Tanshan Sanyou Chemical Industries, which fell 4.36 percent to 8.78 yuan after the company unexpectedly said on Thursday that it had given up a previously announced plan to acquire control of a chemical fibre maker.

Australia, New Zealand, Hong Kong, Singapore and South Korea are closed today for the Christmas Holiday.

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