Property Developers Get Chinese New Year Blues, Hang Seng Slides


In Asia Monday Hong Kong's Hang Seng Index sank 1.5% to 23,554 and in Japan the Nikkei 225 Index gained 0.5% to end the day at 10,592. Markets in China remained closed for Chinese New Year.

There are warning signs that Hong Kong property prices may have hit their peak. Despite the drum beats of the lion dancers specially booked to celebrate Chinese New Year and "guaranteed" to bring prosperity to every business they visit, this year may prove a tough one for Hong Kong developers. While some take the continued rise of real estate prices on the island as an indication that they will rise further, others see it as unsustainable. According to Property Report Asia, January sale prices for four estates surpassed the records set during the boom years of 1997, and other developments are approaching those levels. But data shows that the number of sales in the city are declining and according to the average income in Hong Kong is about $50,212, making prices of $1,141 per square foot coupled with down payment requirements of up to 40% look untenable in the long term.

Hong Kong real estate firms dragged the index lower today. Hang Lung plunged 3.6%, Henderson Land and Cheung Kong both tumbled 2.5% and New World Development lost 2.3%. Sino Land dived 2.8%, China Resources Land declined 2.1% and Sun Hung Kai slid 1.9%.

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Energy producers also closed lower with PetroChina giving up 3.6%, Cnooc losing 2.9% and China Resource Power losing 1.5%.

In Japan an unexpected fall in the U.S. unemployment rate bolstered the confidence of investors already feeling relief after last week's positive earnings reports boosted morale. Big winners included Ebara, a maker of a variety of hydraulic pumps. Ebara shares skyrocketed 14.2% after raising operating profit forecasts by 50%, reports Bloomberg. Credit Saison also joined the party, jumping 8.7% after raising its net income forecast.

Among game makers, Sega Sammy surged 3%. The arcade and pachinko game maker is reported to have garnered a 117% rise in profits for the nine months ending Dec. 31. Nintendo edged up 0.4% but Sony slumped 1.6%, giving back some of last week's gains on the back of better-than-expected third-quarter profits.

Car makers were among the worst-performing sectors today. While Toyota gained 0.9%, Fuji Heavy plunged 4.1%, Mazda plummeted 4%, Isuzu lost 2.7% and Honda dipped 0.1%. Is the sudden surge in gas prices at last putting a damper on the American enthusiasm for the latest and largest SUVs?