6:00AM New York, 6:00PM Hong Kong – China is expected to offer large stimulus package in the second quarter. Domestic earnings in the property and logistics sector drove market indexes lower. Higher bad debt provisions at Bank of America in the U.S. dragged domestic bank stocks lower.

Hong Kong stocks dropped 3% led by financial stocks as Bank of America sharply increased its reserves for future bad debts. The news dragged markets in New York and on the opening in Asia.

In Hong Kong trading Hang Seng Index fell 3% or 465.02 to 15,285.89, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, declined 2.1% or 190.95 to 9,039.09. In Shanghai trading CSI 300 Index dipped 1.2% or 32.22 to 2,675.44.

Daily turnover on main-board increased to HK$57.5 billion from HK$57.1 billion yesterday.

China to Launch More Stimulus in Q2

China Securities Journal reported today that China is considering launching a third batch of stimulus investments in large domestic projects in the second quarter.

The money will be injected in projects to benefit people’s livelihood such as health, education sectors, big infrastructure projects, and housing for low income earners.

Second quarter investment is forecasted to be larger investment than the previously announced packages.

China’s central government has cashed in an estimated Rmb230 billion for the Rmb4 trillion stimulus package that was announced in November.

China’s Retail Sales Rise 18.9% in Q1

China’s Ministry of Commerce reported today retail sales in accommodation and food and beverage industries increased 18.9% to Rmb438.3 billion in the three months to March from the same period a year earlier, which is 3.9 points higher than the growth rate of the retail sales of all consumer goods.

The proportion of the retail sales in the accommodation and food and beverage industries accounted for 14.9% of the retail sales of all consumer goods.

Retail sales in the accommodation and food and beverage industries gained 18.7% to Rmb136.7 billion in March from the comparable year ago period.

In addition, the number of newly established foreign invested enterprises in the accommodation and food and beverage industries fell 43% to 96 in the three months to March from a year earlier.

Total retail sales of consumer goods in the period also advanced 15% to Rmb2.9 trillion.

Real Estate Developers Decline

Country Garden Holdings Ltd. declined 4.5% to HK$2.54 after it reported annual profit decline by 67% to 1.38 billion yuan. The earnings dragged other properties stocks lower. Hang Lung Properties Ltd. dropped 6% to HK$21, Sun Hung Kai Properties Ltd. declined 4% to HK$82.25 and Cheung Kong Holdings Ltd edged lower 2.5% to HK77.30.

Gainers & Losers

The benchmark stock index dropped 3% after Bank of America warned that souring bad debts are increasing.

China Mobile declined 5.1% to HK$70.50 after first quarter earnings declined 5.2%.JP Morgan Chase lowered its earnings for the current fiscal year by 4.8%.