[R]7:00 PM Hong Kong, 7:00 AM New York – Stocks in Hong Kong and Shanghai declined after the Central bank in Beijing sounded cautionary note on the recent rise in bank loans. Exports in June fell 21.4% and trade surplus plunged 40%, eighth monthly decline. Chaina Eastern and Shanghai Airlines announced merger plan. Chigo Group completed initial offering.[/R]

China’s exports declined 21.4% in June from a year ago after falling 26.4% in May. The exports decline has slowed in the last three months but there are no signs of stabilization either.

Imports in the month fell 13.2% and trade surplus dropped 40% to $8.15 billion from $13.4 billion.

In May exports declined 26.4% and imports dropped 25.2% after plunging 43.1% in January according the report from Xinhua News Agency controlled by the government.

The Hang Seng index in Hong Kong decreased 453.79 or 2.56% to 17,254.63 and CSI 300 index in China decreased 37.30 or 1.10% to 3,361.01.

Gainers & Losers

China Eastern and Shanghai Airlines surged daily limit of 5% after both companies traded for the first time since June 5. China Eastern will issue newly listed shares at 17% premium to the Shanghai Airlines shareholders that value the smaller airline at 9 billion yuan.

China Eastern, the third largest carrier by capacity closed at 5.6 yuan and Shanghai Airlines closed at 6.22 yuan.

Cathay Pacific dropped 5.1% to HK$10.50.

Jiangxi Copper declined 3.9% to 32.66 yuan and Jinan Iron & Steel Co. dropped 2% to 4.97 yuan after it estimated first half loss.

Banks closed lower on the worries that loan surge in the first half of this year may lead to higher defaults later. China Construction Corp dropped 2.1% to 6.03 yuan and Merchants Bank decreased 2.7% to 17.86 yuan.

Chigo Group, the fourth largest air conditioner maker increased 11% to HK$2.51 after the company raised HK$120.7 million in initial public offering that priced each share at HK$2.27. The company traded as high as HK$3.075. Approximately 60% of the offering proceeds will be used to expand production capacity and 30% will be used in marketing and 10% will be used for working capital.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 236.95 or 2.55% to 9,050.33, Hang Seng index in Hong Kong decreased 453.79 or 2.56% to 17,254.63 and CSI 300 index in China decreased 37.30 or 1.10% to 3,361.01. ASX 200 index in Australia decreased 56.60 or 1.49% to 3,737.50. The FTSE Bursa KL Composite index in Malaysia closed lower 4.10 or 0.38% to 1,063.66.

The Kospi Index in South Korea decreased 50.50 or 3.53% to close at 1,378.12. SET index in Thailand closed lower 3.48 or 0.61% to 562.55 and JSE Index in Indonesia decreased 42.96 or 2.08% to 2,020.14. The Sensex index in India decreased 103.90 or 0.77% to 13,400.32.