1:00PM New York – China raises interest rates for the third time this year, but may not manage to cool the fast rising economy.

The People’s Bank of China reported one year borrowing rate and deposit rates by 0.27% to 6.84% and 3.33% respectively. The central bank has targeted inflation rate at 3% but the rate in June jumped to 4.4% on higher food and energy prices. China is worried that fast rising food prices may prompt wage hikes yielding the temporary rise in food prices to a permanent inflation. Reflecting the recent rises in interest rates, the currency yuan has increased 1.6% in the second quarter in addition to 1% rise in the first quarter. The bank also lowered tax to 5% from 20% on interest earned from fixed deposit to make them more attractive to stocks. The net yield for the deposits, as of Aug 15, will rise to 3.16% from 2.66%.

With yields so low in the bank deposits, investors have pulled money from banks and invested in the stock market lifting the Shanghai CSI index more than 60% this year on top of 89% rise in the year 2006.

Retail sales in China are growing at 34% on rising wages and rising purchases of furniture, household goods, and automobiles.

12:30PM New York, 11:00PM India – Sensex Closes higher on telecom stocks and earnings from Larsen & Toubro.

In Mumbai trading Sensitive 30 Index increased 0.1% to 15,565.55, record close. The index edged higher on strength in telecom stocks and steady fund flows from international investors.

Economy News

Wholesales Price Index, a measure of annual inflation, for the week ending July 7th, was reported at 4.27%, unchanged from the previous week ending. The food prices fell in the week but failed to impact the overall inflation.

Deal News

Reliance Communication jumped 1.3% after adding more than 2% in the previous session on a deal to sell 5% stake in its telecom tower unit for 27,000 rupees or $338 million to a group of private equity investors. The deal values the infrastructure unit at $6.5 billion. Bharti Airtel jumped 3% on the news hoping for a similar deal for its tower unit. Reliance reached 592 rupees and Bharti at 943 rupees, traded at record intra-day high. Reliance Communication chairman Anil Ambani had earlier said the group of companies controlled by second richest man in India has a capacity to borrow more than $5 billion in the international markets.

Metals and Commodities

Firmness in metals prices lifted stocks of Tata Steel and SAIL. Tata Steel jumped 5% to 715.90 rupees, JSW Steel advanced 2.7% to 722 rupees, Hindustan Zinc added 2.5% to 788 .60 rupees, SAIL increased 0.6% to 156 rupees.

Cements stocks fell after rallying for more than two weeks. ACC fell 3.7%, Ambuja Cement lost 2.3%, and India Cements dropped 1.3%.

Earnings News

Satyam reported earnings of 3.78 billion rupees on 27% rise in sales to 18.3 billion rupees. The stock fell 2% on the news.

Larsen & Toubro jumped 4.2% on net income of 3.77 billion rupees. Company secured projects worth $180 million in the quarter.

Gujarat Ambuja profit surged 168% on 16% increase in revenue to $180 million.


11:30AM New York, 10:00PM India – Korea, India and Hong Kong close at record in Asian trading.

Asian Markets across the region advanced on rising oil and metals prices, higher earnings, and positive sentiment in New York and European trading a day ago. Shanghai led the region with a sharp rise of 4.3% followed by 2.36% rise in South Korea, 1.4% gain in Indonesia, 1.3% rise in Singapore, 1.2% in increase in Taiwan, and 1.2% ahead in Hong Kong, and 0.6% edging up in Australia. Japan increased a fraction 0.23%.