Massive Oil Explosion in Dalian Port Drags HK Shares Lower
The explosion of an oil pipeline in China's busy Dalian Xingang oil port on Friday has forced authorities to shut the entire port for at least one week, according to Reuters. The disaster occurred during the transfer of crude oil from a ship to a storage tank, causing two massive explosions in the pipeline, which burst into flames and took hundreds of firefighters more than 15 hours to extinguish. Oil has leaked out into the Yellow Sea, causing a 19 square-mile slick. According to RBS oil analyst David Johnson, damage is estimated at $50 million. "It's not going to be a major cost in the big scheme of things," he told Reuters.
By the end of trading today, shares in Dalian Port had fallen 5.1% in Hong Kong and Shares in PetroChina, which operates two refineries in the area, slid 1.4%. Meanwhile, oil exploration company Cnooc gained 0.8%. Zijin Mining plunged 3.7% today. The mining company has lost value due to another environmentally disastrous mishap in which waste water has leaked into a lake killing millions of fish. Zijin shares have fallen 10% in the last three days of trading.
Weak earnings reports from U.S. companies, including Bank of America and Citigroup, resulted in gloomy results for Asian exporters as investors fear American consumers will tighten their purse strings. Clothing and toy distribution giant Li & Fung plummeted 2.6% and Esprit dropped 2.2%. Hong Kong-listed shipping companies that transport goods across the seas tumbled with China Shipping Container Lines plunging 2.9%, Cosco Pacific falling 2.5% and China Shipping Development declining 1.9%.
China investors benefited from a strong statement from Premier Wen Jiabao, who promised "continuity and stability" in terms of China's macroeconomic policies, reassuring the people that the government is in full control of the economic slowdown. In Shanghai, energy shares pushed the index higher. Coal companies rose with Shanxi Xiahan Coal & Electricity Power skyrocketing 6.7% and China Shenhua Energy surging 3.2%.
Chinese Banks also posted gains with China Merchants Bank soaring 2.6%, Industrial & Commercial Bank of China advancing 1% and Bank of China rising 0.9%. Agricultural Bank of China added 0.7% today after its massive $22 billion IPO last week.
Among other top performers, Bright Dairy & Food leaped the 10% daily limit after announcing plans to buy a 51% stake in a New Zealand dairy company. The deal could be a good one for Bright Dairy since Chinese milk has quite a sour reputation. Scandals involving tainted milk have dogged the Chinese milk industry for years, with 25,000 tonnes of milk powder contaminated with toxic melamine found as recently as this month, according to AFP. In China, contamination is not limited to the environmental damage of land and sea.