Massive Floods Devastate Southern China and Markets Rise
Massive floods in China are putting the Three Gorges Dam project to the test. According to China Daily, recent rainstorms have resulted in the highest water levels seen since the completion of the project last year, and the flooding is also straining dams at reservoirs around the region. Dams at six reservoirs have already collapsed. The floods have so far caused 3.8 billion yuan ($500 milion) worth of economic damage, and there are worries that rice and other crops will be ruined.
Damage to residential towns and businesses has been extensive, with enormous mudslides that have buried communities and rushing waters that have dragged entire buildings from their foundations. Reuters reports that about 49,000 houses have been destroyed, and meteorologists are predicting that even heavier rains are on their way. One minister in charge of water resources has declared that there is much work to be done rebuilding outdated reservoirs, which could cost more than 24.3 billion yuan ($3.5 billion).
Today shares in Chinese building-related companies climbed, helped along by increased optimism about the property sector, despite plans to implement a property tax by 2012 on a trial basis. Beijing New Building Material and Zhejiang Weixing New Building Materials both climbed 1.1% and Hubei Sanxia New Building Material rose 0.5%. Xinjiang Qingsong Building Materials, which makes cement, advanced 0.6% and Anhui Conch Cement added 0.3%.
Steelmakers also closed higher with Angang Steel rising 2.8%, Baoshan Iron & Steel gaining 0.6% and Maanshan Iron & Steel inching up 0.3%. Among Chinese developers, Poly Real Estate surged 4.5%, China Vanke jumped 3% and Gemdale gained 2.4%.
Yangtze Power dipped 0.2% and the Chongqing Three Gorges Water Conservancy & Electric Power advanced 0.4%.
In Hong Kong, it was all about property, after Jones Lang LaSalle predicted that the value of luxury homes could jump 10% in the next six months. They're bullish on Hong Kong property, saying Hong Kong rentals of office space could rise more than 10% this year and that they're expecting even bigger hikes in prime locations like Central, the downtown business district, where they foresee a 25% increase. This is a stark contrast with cities like London or New York, where more and more commercial spaces look like they're being vacated. LaSalle also says there's been a surge of more than 10% in rental prices for luxury residences like the ones usually occupied by expats.
Today, shares in Hong Kong developers surged. Wharf Holdings, which leases acres of space in its high-end malls, rose 2.5%, Henderson Land advanced 1.4%, Swire Pacific, a major Hong Kong landlord, advanced 1.3% and Sun Hung Kai gained 1%.
The colossal floods in China have forced some oil producers to shut wells. According to Bloomberg, China Petroleum & Chemical, said they had shut some wells and Sinopec said more than 100 of its wells had been affected. Cnooc, has not publicly stated whether the rains had affected any of its rigs. Today China Petroleum & Chemical inched up 0.3%. Sinopec slumped 1% and added 0.2%. Companies doing business in China have to be prepared for a major storm now and then.