Real Estate Companies Slump in China, but Continue to Rise in HK

In Asia Wednesday, China's Shanghai Composite Index slid 0.3% to 3,148 and Hong Kong's Hang Seng Index rose 1.8% to 21,929. In Japan the Nikkei 225 Index inched up 0.1% to 11,293.

Fears that the Chinese government might raise interest this quarter sent real estate shares lower. Poly Real Estate tumbled 2.5%, Gemdale slumped 1.9% and China Vanke fell 1.5%. Even Jiangsu Phoenix Property Investment, which recently restructured its business in a shift away from glass and plastics and into high-yielding property, plunged 2.9% today.

Raw material makers also slid, with Datong Coal Industry falling 1.5%, Yanzhou Coal Mining dipping 1.4% and China Coal Energy losing 1.1%. Iron producer Baoshan Iron & Steel lost 1.7% and Jiangxi Copper dropped 1.1%. Gold miners, however, continued their upward trajectory with Shandong Gold Mining rising 1.5% and Zijin added 0.3%. According to the World Gold Council, Chinese appetite for gold is expected to double over the next decade.

Herbal medicine makers were on the rise with Shandong Dong-E E-Jiao surging 3.7% on first quarter profits. The company makes popular products from donkey skin, such as Shandong Donkey-Skin Glue, which heal blood ailments and apparently have a sweet taste. Yunnan Baiyao Group climbed 3.5% and another traditional medicine company, Guangzhou Parmaceutical, soared 4.7%.

In Hong Kong, commodity producers also headed north with oil company CNOOC rocketing up 6.4% on increasing oil prices. Yesterday oil topped $87 per barrel for the first time in nearly a year and a half. Chalco, or Aluminum Corp. of China, gained 4.1% and China Shenhua, which provides coal-based energy, advanced 4.1%.

In Hong Kong, property companies were still a sure bet with companies doing business in China rising on the exchange. Soho China, which specializes in Japanese home-office environments, spiked up 3.7%, New World Development surged 3.4% and Cheung Kong was up 1.4%. Blue chip Hong Kong property companies also posted gains, with Hang Lung rising 2.5%, Sun Hung Kai gaining 1.8% and Henderson Land advancing 0.5%.

In Japan, banking stocks boosted the Nikkei with Sumitomo Mitsui gaining 4.2% and Mitsubishi UFJ rising 3.3%. Real estate also fared well with Heiwa Real Estate climbing 2.4% and Tokyu Land Corp. up 1.9%.

Japanese railroad companies added to yesterday's gains with West Japan Railway surging 2.5% and Central Japan Railway and East Japan Railway both gaining 1.8%. All good signs that after more than a decade of stagnation, things might actually be looking up in Japan.