[R]8:00 AM Hong Kong – Investors in Hong Kong and in Shanghai struggle to gauge the durability of China stimulus plan. Companies in China are looking to raise capital as companies in Europe, Asia and U.S. race to repay debts. Pacific Basin Shipping and PetroChina tap investors.[/R]

Stocks in Shanghai and Hong Kong are expected to open lower after the weak retail sales in the U.S. and weaker than expected earnings in Europe dragged world markets lower.

On Wednesday’s trading, investors focused on the weak global markets and worried how far the government spending can sustain the economy before the higher inflation sets in.

China is in the midst of large fiscal and credit expansion to sustain the economic recovery but with falling exports. The capital investments to build factories and properties increased 30.5% in the first four months from a year ago as loans in the period surged to 5 trillion yuan.

Hang Seng index in Hong Kong decreased 94.02 or 0.55% closed to 17,059.62, CSI 300 index in China higher 25.44 or 0.91% closed to 2,814.00.

Of the stocks in Hang Seng, 22 increased, 18 declined and 2 were unchanged.

In Hong Kong trading banks declined on weakness in global banks in Europe, Japan and New York trading.

Pacific Basin Shipping declined 4.1% to HK$4.41 after the largest dry bulk carrier surveyed the market to raise HK$770 million. The offering is expected to sell at least 170 million shares according to two fund managers in Hong Kong.

Geely Automobile Holdings Ltd increased 4% to HK$1.30 after a Swedish newspaper cited the company to in the final three suitors to bid for Saab Automobile owned by the distressed General Motors. The news was first reported on Bloomberg News.

China Construction Bank fell 4% after a large block of stock was sold at a discount.

In Shanghai trading, PetroChina surged 6.1% after shareholders approved the sales of 100 billion yuan bonds to fund exploration and transmission infrastructure. Sinopec gained 3.1% to 10.82 yuan.

China Shenhua Co. increased 2.7% and China Coal Energy surged 7.1%.

Slower Pace of China Retail Sales Growth

National Bureau of Statistics of China reported April total retail sales of consumer goods reached 934.32 billion yuan, an increase of 14.8% from a year ago.

In terms of different regions, the retail sales of consumer goods in urban areas was 632.96 billion yuan, rose by 13.9%; sales below the county level increased 16.7% to 301.36 billion yuan.

Separately, industrial production increased 7.3% in April from a year ago after rising at 8.3% in March.

Earnings Review

Hong Kong Exchange declined 0.4% to HK$109.90 after it reported net income declined 49% to HK834.2 million. The daily turnover on the exchange declined to HK$44.7 billion from HK$98.40 billion. However, in the first five weeks of the year the daily turnover has edged over HK$65 billion.

Tencent Holdings Limited, the provider of Internet service and mobile value-added services reported first quarter revenues rose 78.6% to HK$2.5 billion from HK$1.4 billion a year ago. Net profit in the quarter rose 94% to HK$1.04 billion or HK$0.57 per diluted share compared to net profit of HK$534 million or HK$0.29 per share a year ago

Tencent Holdings Limited, in the last one year traded as high as HK$75.00in August 2008 and as low as HK$35.25 in October 2008. Based on the yesterday’s closing price of HK$73.00 the company has market cap of HK$131.04 billion.