Hong Kong shares kicked off 2009 on a firm note, rising 4.6 percent to a two-week high on Friday amid thin volumes, led by strong gains in Chinese telecom companies on hopes of the imminent issuance of 3G licences. Stocks across the board notched up strong gains on hopes that the flow of bad news that pushed Hong Kong's blue chip index to its worst drop in over three decades last year would subside in the new year while attractive valuations would tempt investors back into the equity market. The Hang Seng Index finished 655.33 points higher at 15,042.81 after opening up 0.4%. The index rose more than 6 percent this week, helped in part by year-end window dressing in the last week of December. Turnover stayed slim at HK$30.5 bln ($3.9 bln) with many market participants still away on holidays... The Sensex opened 70 points higher at 9,973, and soon slipped into negative zone to touch a low of 9,864. However, on expectations of the government announcing second stimulus package, the index bounced back on a strong rally in capital goods, realty and banking counters and crossed the 10,000-mark. The index touched a day's high of 10,070. Profit booking in last trading session saw the index pare gains and finally settled with a gain of 55 points at 9,958. The market breadth was positive - out of 2,600 stocks traded, 1,702 advanced, 820 declined and 78 were unchanged today. (Reuters, Business Standard)

In 30-year-old cradle of Chinese capitalism, factories brace for more wrenching change

The Associated Press reports when China opened up to capitalists 30 years ago, Jeffrey Lam was one of the pioneers. But the only space he could find for his factory was an old town hall. For workers, he had 25 farmers who had never operated a sewing machine.

Today the Hong Kong businessman has five toy factories employing thousands of workers in southern China. He personifies the experiment begun in December 1978 that would ultimately transform the face of world trade.

Still, Lam says, the early days pale before the challenge now looming -- to retool factories that make shoes, toys and textiles into an innovating high-tech industries.

"It's going to be much more difficult now," he said.

The global economic slowdown is hitting hard. Here in Guangdong province where the manufacturing push began, more than 7,000 companies closed or moved elsewhere in the first nine months of the year, the China Daily newspaper reported.

It's not just the global slowdown. In Guangdong's Pearl River delta, where the capitalist drive was launched on the coattails of rich neighbor Hong Kong, a new realization is taking hold -- raw materials cost more, labor and environmental laws have grown stricter, exporters are getting fewer tax breaks, and a string of product recalls have raised questions about Chinese quality.

So China has a sweeping plan to transform the region. Rather than bail out weak, labor-intensive factories, it wants them to move to the interior so that Guangdong can become the country's auto maker and its Silicon Valley.

"We have a policy to empty the cage for the new birds," said Wan Qingliang, a provincial vice governor.

The financially troubled world is watching, especially the United States, China's biggest trading partner, something Wan possibly had in mind in meeting foreign reporters for a rare briefing.

The market turbulence makes the task more urgent, he said. "History tells us that after 20 to 30 years, the growth pattern of an economy becomes mature and must be changed. Guangdong has to be the pioneer now in economic restructuring."

When Chinese leaders started experimenting with capitalism, Missouri-sized Guangdong seemed an obvious choice -- rich in land and cheap labor, close to Hong Kong's investors, cash, and business expertise, and a good 1,000 miles from meddling communist bureaucrats in Beijing.

In the province once known to Westerners as Canton, the saying was: "Heaven is high, the emperor is far away."

And if things ended badly, the government in Beijing, still finding its feet two years after the death of communist founding father Mao Zedong, wouldn't take all the blame.

All went smoothly. Investors poured in from Hong Kong, Taiwan, the U.S. and Europe. Places such as Shenzhen and Dongguan, villages of rice paddies and fish farms, blossomed into cities with industrial parks making Adidas sneakers, and later iPods and Nokia Corp. cell phones.

In 1992, the region got a huge psychological boost from a visit by Deng Xiaoping, China's visionary paramount leader, famous for having declared: "To get rich is glorious."

Since 1978, Guangdong's economy has posted average annual growth of 13.8 percent, the province's highest-ranking Communist Party official, Wang Yang, said in a speech last week marking the 30th anniversary of the reforms.

Guangdong accounts for one-third of China's foreign trade and a quarter of its foreign investment, Wang said. Its economy is larger than that of Singapore, Hong Kong or Taiwan.

But senior provincial officials worry that too many factory owners are content to make cheap goods for export rather than innovate and develop their own products. There's also fear that Guangdong is being eclipsed by the Shanghai region, whose boom started later but was more planned and orderly.

"Liberate your thinking" and "retool and upgrade" are the current buzz-terms here.

Companies are also being urged to focus on the domestic market so that China's economy can break its dependence on exports.

That won't be easy for many factories. They're great at taking a design from a foreign customer and making the product, but not at marketing and distributing their own designs to Chinese consumers.

"People here can afford our equipment now," said Sam Hsieh, general manager of Chain Horn Commerce Ltd., which makes movie projectors and medical equipment. "But we haven't figured out how we're going to distribute the product yet."

Lam, the toy maker, says his Forward Winsome Industries, Ltd., already is designing products and developing its own brands to sell in China.

But moving out of Guangdong will be a challenge for many companies, dependent on local suppliers that have taken years to cultivate.

Andy Xie, an independent economist in Shanghai, is skeptical about the government's plan, though not necessarily the province's future.

"Guangdong offers you a playground. You go there and then hire people from other places. The advantage of Guangdong is flexibility," Xie said. "Eventually, that will be the solution. It won't be a government solution."

Japan's Nikkei average lost 1.4% on Monday, with high tech shares such as Advantest down on profit-taking as trade thinned on investor fears about U.S. jobs data due out later this week. The benchmark Nikkei shed 115.05 points to 8,397.22, while the broader Topix lost 0.9% to 827.47 in extremely thin trade... Hong Kong shares rose 1.6% to a three-week high on Monday, as property stocks gained on hopes of better sales, while news that China's Yunnan province would buy 1 mln tonnes of base metals lifted metal stocks. The benchmark Hang Seng Index closed the session up 220.60 points at 14,108.84, led by a 2.3% rise in China Mobile... The Sensex opened 70 points higher at 9,163 on the back of slightly positive cues from the global markets. Fresh buying in morning trades - mainly realty, banking, metal and energy stocks - led the index to a high of 9,327 - up 234 points from the previous day. The index, however, could not hold gains as weakness in auto stocks soon spread to banking and later on to realty stocks. Negative cues from the European markets, and the US futures further weighed on our markets. As a result of which, the index slipped into red and slumped to a low of 8,803 - down 524 points from the day's high - towards the end of the day. The Sensex finally ended with a significant loss of 253 points at 8,840. (Reuters, Business Standard)

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Japan's Nikkei average slipped 2.3% on Tuesday, dragged down by worries about a weakening global economy that battered exporters such as Sony, though bargain-hunting prevented further slides. Japanese Economics Minister Kaoru Yosano said on Tuesday the economy may not grow in the fiscal year starting next April, issuing one of the bleakest comments yet on the impact of the economic downturn. Government data showed on Monday that Japan's economy has slipped into recession, confirming that the global financial crisis has sabotaged growth in yet another major economy, with the euro zone already in recession. With trade thin, the benchmark Nikkei shed 194.17 points to 8,328.41. The broader Topix lost 1.8% to 835.44... Hong Kong shares shed 4.5 on Tuesday, unsettled by worries over a protracted global recession, and China Construction Bank slid after Bank of America said it was increasing its stake in the Chinese lender at a discount to its current stock trading price. The benchmark Hang Seng Index finished down 613.64 points at 12,915.89... The Sensex opened with a significant negative gap of 9,084 -At first, the index recovered partially and touched a high of 9,169, only to fall back sharply lower to 8,872. The Sensex finally ended with a loss of 354 points at 8,937. down 207 points - on the back of negative cues from the US markets. The index languished in the negative zone throughout the day amid some volatility.