Updated from 6:47 p.m. EDT
Stocks prices sold off sharply Tuesday in mainland China after the government vowed to take steps to curb inflation. The selling of shares accelerated after Prime Minister Wen Jiabao said during a televised news conference that fighting inflation would be a top priority and China wouldn't revalue the yuan to help ease the pressure. Jiabao went on to say that that the government's 4.8% inflation target for 2008 will be difficult to achieve.
The rise in inflation has many investors in the Far East concerned that the Chinese economy may be in danger of overheating. China's Shanghai Composite Index fell 151 points, or 4%, to 3,668.90.
"Market sentiment weakened in the afternoon as Premier Wen had no obviously market-friendly remarks at his news conference ending the annual National Peoples' Congress. However, the market is likely to see technical rebounds soon after recent declines brought the key index to an eight-month low," said Hua Xin, an analyst at Founder Securities.Shares in Hong Kong escaped the selling pressure with the Hang Seng Index rising 300 points, or 1.4%, to 21,384.61, rebounding from Monday's 1000-plus point decline. "Today's gains were probably just a short-term bounce after yesterday's sharp fall," said Miles Remington, head of sales trading at BNP Paribas. Leading Chinese advertising company Focus Media (FMCN) bounced back from Monday's losses after the firm came out and denied reports that its Focus Media Wireless subsidiary was responsible for sending out unsolicited SMS messages to Chinese mobile phone users, according to Barrons. The company issued a statement saying, "Focus Media does not approve sending advertising messages to mobile users without user consent. FMW have established an internal policy to strictly prohibit sending SMS or MMS messages without the explicit consent of the receiving mobile use." Focus Media's ADR shares advanced sharply, trading up 16% to $37.41. Chinese fabless semiconductor company Vimicro International (VIMC - Get Report) received an upgrade from Susquehanna Financial Group to neutral from negative. Susquehanna mentioned in a research note to clients that VIMC is trading below its cash value. The upgrade did little to help ADR shares of Vimicro, which finished flat at $2.73. In the communications sector, Hutchison Telecommunications (HTX) announced a 300% rise in profits for 2007 due to a one-time gain from the sale of its Indian unit. The company said its net profit rose sharply to 66.88 billion Hong Kong dollars, vs. 201 million Hong Kong dollars for the prior year. The strong profit report wasn't enough to lift ADR shares of Hutchison, which closed essentially flat at $22.29. Chinese electric utility company Huaneng Power International (HNP) ripped higher after the company said it will buy Singapore power company Tuas Power for $3.04 billion. The deal is reported to be the biggest overseas acquisition by a Chinese power firm. ADR shares of Huaneng Power advanced 10% to $27.49. Elsewhere in the Chinese energy sector, PetroChina (PTR) rose 5% to $130.48; China Petroleum & Chemical (SNP) added 5% to $86.12; Sinopec Shanghai Petrochemical (SHI) traded up 8% to $36.41; and Cnooc (CEO) fell by 0.5% to $149.29. Be sure to check out the Far East Portfolio at Stockpickr.com every night to find out which stocks in India and China are making big moves and announcing major news.