Up, Up, and Away!

China Economic Scan - Your daily update on the Chinese economy - 13-August-2009

In this edition: Rio Tinto Scandal, New Deal in Australia with Felix, Commodities and Finance Rally Up, 50 Day Moving Average Positive, New Flights to Taiwan

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26 June 2009 | China Economic Scan

26-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China tells banks loans must help the real economy, China sees net capital inflows again, China Construction Bank and Santander plan rural venture, China Minsheng selects four banks to run its Hong Kong IPO, Chinese stocks creep up on Thursday.

Top 5 headlines

China tells banks loans must help real economy

• China's banking regulator has urged lenders to ensure new loans are helping the economy after concerns that stimulus cash is being used to speculate on stocks and property, state media said.
• The China Banking Regulatory Commission reiterated that loans must serve the needs of the real economy, the official Shanghai Securities News reported, citing a recent internal directive issued to commercial banks.
• In May, new yuan-denominated loans reached 664.5 billion yuan, the central bank said earlier this month, bringing the total in the first five months to 5.84 trillion yuan.

China seeing net capital inflows again -SAFE

• China is once again experiencing net capital inflows, but they are still lower than a year ago, a senior official said on Thursday.
• Guan Tao, deputy director for the department of international payments at the State Administration of Foreign Exchange, said net inflows were recovering not because of a new surge of money coming into China but because outflows were receding.
• Apparent net capital outflows reached $45 billion in the last quarter of 2008 and $109 billion in the first quarter of 2009, according to World Bank estimates.

China Construction Bank, Santander Said to Plan Rural Venture

• China Construction Bank Corp., the world’s second-largest lender by market value, plans to set up a venture with Banco Santander SA to provide banking services in China’s rural areas, people with knowledge of the matter said.
• Construction Bank, based in Beijing, aims to set up as many as 100 separate units together with Santander that specialize in financing farmers and rural businesses, the three people said, declining to be identified as the talks are private. It wasn’t clear how much each bank would own of the venture.
• Santander, Spain’s largest lender, would join HSBC Holdings Plc and Citigroup Inc. in tapping China’s countryside, where the central bank estimates two-thirds of the 700 million inhabitants lack access to banking.

2nd UPDATE:China Minsheng Picks 4 Banks To Run HK IPO-Source

• China Minsheng Banking Corp. (600016.SH), which owns nearly 10% of San Francisco-based UCBH Holdings Inc., has picked four investment banks to lead manage its planned CNY20 billion (US$2.93 billion) Hong Kong initial public offering, a person familiar with the situation said Thursday.
• BOC International Holdings Ltd., China International Capital Corp., Macquarie Capital (Hong Kong) Ltd. and UBS AG (UBS) have been mandated as joint lead managers of the bank's Hong Kong IPO, the person said.
• As part of efforts to boost its financial position ahead of the stock offering, China Minsheng raised CNY5.46 billion from the sale of its entire 4.6% stake in Haitong Securities Co. (600837.SH).

Most China Stocks Drop; Jiangxi Falls, Pacific Insurance Gains

• Most China stocks fell on speculation this year’s rally has outstripped the prospects for earnings growth with the benchmark Shanghai Composite Index trading at the most expensive relative to earnings in 15 months.
• Jiangxi Copper Co., the country’s biggest producer of the metal, slid 1.7 percent after more than doubling this year and Aluminum Corp of China Ltd. dropped 2.4 percent. China Pacific Insurance (Group) Co. rallied 6.4 percent after the Shanghai Securities News said the company may list shares publicly in Hong Kong next year.
• “Shares have risen to an expensive level and everyone is expecting a correction to take place soon,” said Wang Zheng, a fund manager at Jingxi Investment Management Co. in Shanghai. “That’s why buying has become more and more cautious.”

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,275	382.88	2.14%
Shanghai Composite	2,925	2.75	0.09%
Shenzhen Component	11,386	4.24	0.04%
TAIEX	6,458	77.53	1.22%
CNY/USD	6.8345	0.0015	0.02%

Source: China Economic Scan

25 June 2009 | China Economic Scan

25-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: OECD raises China growth forecast to 7.7%, China defends export limits and counters with own complaints, more Chinese investment in Australia said to be inevitable, S&P signs MoU with Shenzhen stock exchange, Chinese stocks rally on Wednesday.

Top 5 headlines

OECD Raises China Growth Forecast to 7.7% on Stimulus Measures

• The Organization for Economic Cooperation and Development raised its forecast for China’s economic growth and said stimulus measures may spark the biggest boom in urban investment since the early 1990s.
• China’s economy will grow 7.7% from a year earlier, up from a 6.3% forecast in March, the Paris-based group said in a report today. Gross domestic product will climb 9.3% next year, up from an 8.5 percent estimate, it said.
• “In the last two to three months China has turned its economy around,” said David Cohen, an economist with Action Economics in Singapore. “Government officials are increasingly confident that they’ll get closer to their 8 percent growth target than many feared a few months ago.”

China Defends Export Limits, Highlights Its Own Trade Complaint

• China’s government said it will contest complaints to the World Trade Organization from the European Union and the U.S. that the nation unfairly limits exports of raw materials such as magnesium, coke and zinc.
• The policy aims to protect the environment and natural resources and “is in accordance with WTO rules,” the Ministry of Commerce said in a faxed statement today.
• The EU and U.S., which yesterday lodged their third joint complaint against China, allege that the nation’s export taxes keep material costs lower for domestic steel and manufacturing companies. Today, China called for a WTO probe of U.S. restrictions on poultry imports and the trade body’s former chief, Mike Moore, warned that the world is in “dangerous waters” as protectionism increases.

More Chinese investment in Australian resources "inevitable"：Australian expert

• Australia and China both have the need to enhance cooperation in trade and capital flows and there is "inevitably" going to be more investment from China in Australia's resources industry, said Owen Hegarty, G-Resources Group Ltd., senior Australian expert in mining industry Monday in Hong Kong.
• As a country with a relatively small GDP, Australia has the need to enhance cooperation in capital flows with China, said Hegarty in a gold investment forum held in Hong Kong.
• Hegarty considered it inevitable to have further Chinese investment in Australia's resource industry, despite the cancelled tie-up deal between Chinalco and Rio Tinto recently.

S&P joins forces with Shenzhen Stock Exchange

• Standard & Poor's is joining up with the Shenzhen Stock Exchange (SzSE) in China to cooperate on index development and product listings.
• The index provider today signed a memorandum of understanding, which authorises S&P to use its securities information to create and launch a series of investable and benchmark indices in China to meet the growing needs of global investors.
• It will also license the S&P 500 to allow the SzSE to develop a listed open-ended fund through its Qualified Domestic Institutional Investor program, which allows Chinese institutional investors to access overseas markets.

Chinese Shares Up On Ore Discovery

• The Shanghai stock market climbed to one-year high on Wednesday. Commodities stocks led the rally after a huge iron ore deposit, which is said to be Asia's biggest, was found in China's northern province of Liaoning.
• While Chinese steel markers are in tough price negotiations with major iorn ore miners, China said Wednesday that it had discovered Asia's biggest iron ore deposit in Liaoning province. Local officals estimated the mine has reserves of at least 3 billion tonnes and could start production next year.
• The newly discovered mineral deposit boosted the stock of China's biggest Baoshan Iron & Steel up 3.0% to 7.20 yuan ($1.05). The country's No.2 Angang Steel Co rocketed 7.4% to 14.18 yuan ($2.08). The Shanghai Composite Index as a result surged 1.0% to 2,922.30, the highest since July last year.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,892	353.78	2.02%
Shanghai Composite	2,922	29.6	1.02%
Shenzhen Component	11,382	255.98	2.30%
TAIEX	6,380	182.61	2.95%
CNY/USD	6.8330	-0.0018	-0.03%

Source: China Economic Scan

24 June 2009 | China Economic Scan

24-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: China East Star Airlines gets offer from investors, Wuhan steel to invest $400m in Brazil ore assets, CapitaLand Retail says Chinese land too expensive, Gome shares jump on Bain investment, Chinese stocks fall on Tuesday.

Top 5 headlines

China East Star Airlines gets offer from investors

• East Star Airlines, a debt-ridden privately held Chinese carrier, said it will sell at least an 85 percent stake in the firm to help it make a comeback.
• East Star will get at least 500 million yuan ($73.2 million) from outside investors, led by little known Shanghai Yujie Industry Co, the company said in a statement late on Monday. No timetable or details of other investors were available.
• The small carrier has filed for bankruptcy protection with a local court in Wuhan, its home base. It has total debt of more than 500 million yuan, Wu Yue, a lawyer hired by the company, told reporters at a news conference.

Wuhan Steel May Add to $400 Million Brazilian Ore Investment

• Wuhan Iron & Steel Group, offering $400 million to buy Brazilian iron ore assets, will seek other investment opportunities in countries including Australia to meet its rising demand for the steelmaking material.
• China’s third-largest steelmaker is seeking partners that are “honest and faithful,” spokesman Bai Fang said today. “It doesn’t matter whether our target is a big miner or not,” he said.
• Wuhan Steel offered to buy a stake in MMX Mineracao e Metalicos SA and a unit for $400 million, Rio de Janeiro-based MMX said yesterday. China may spend more than $500 billion on foreign resource investments over the next eight years, according to Deloitte Touche Tohmatsu.

CapitaLand Retail Delays Land Acquisitions in China

• CapitaLand Retail Ltd. said China land remains too expensive for it to make acquisitions and the unit of Southeast Asia’s biggest developer will instead focus on completing its shopping mall projects in the country.
• “I don’t think it’s the right time” to buy more land for retail projects in China, Lim Beng Chee, chief executive officer of CapitaLand Ltd.’s retail unit, said in an interview.
• Hong Kong’s Hang Lung Properties Ltd. and Shimao Property Holdings Ltd. resumed land purchases in China this year as home prices rise in the world’s third-biggest economy. CapitaLand Retail operates 29 malls in China, and plans to open 29 more in the next three years, Lim said yesterday in Singapore.

Gome shares jump 70 percent on Bain investment

• Shares of Gome Electrical Appliances, China's leading home appliance chain, jumped nearly 70 percent Tuesday after announcing an investment from U.S. private equity firm Bain Capital.
• The shares surged 69 percent to 1.9 Hong Kong dollars (24.5 cents) in their first day of trade since being suspended in November amid a corruption investigation centered on the company's tycoon founder.
• Gome said Monday it plans to raise at least $417 million by issuing convertible bonds to Bain and selling new stock to existing shareholders.

China shares fall on worries about world economy

• Chinese shares snapped a four-day rally and fell slightly Tuesday on worries about the world economy, but banking and steel stocks gained.
• PetroChina Ltd., Asia's biggest oil and gas producer, shed 2.5 percent to 13.88 yuan, while China Petroleum & Chemical Corporation lost 2 percent to 10.31 yuan.
• China Shenhua Energy Ltd., the country's biggest coal producer, declined by 3.1 percent to 26.57 yuan, while Pingdingshan Tianan Coal Mining Co. gave up 3.2 percent to 35.9 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,538	-521.18	-2.89%
Shanghai Composite	2,893	-3.6	-0.12%
Shenzhen Component	11,126	-65.05	-0.58%
TAIEX	6,197	-143.74	-2.27%
CNY/USD	6.8348	-0.0004	-0.01%

Source: China Economic Scan

23 June 2009 | China Economic Scan

23-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: New loans in China to reach 6.5 trillion in H1, Citic says transfer of state held shares a positive move, China refines record level of crude oil May, China Minsheng wins investor approval for Hong Kong share sale, Chinese stocks gain for fourth day.

Top 5 headlines

New loans may reach 6.5t yuan in H1

• China's new yuan loans in the first 20 days in June exceeded that of the same period in May, making it possible that new loans may reach 6.5 trillion yuan ($951 billion) in the first half of 2009.
• According to the source, banks also tend to expand their credit line when the month is ending, which makes it almost certain that new loans in June will exceed that of May and that the 6.5-trillion expectation will come true, considering the current trend for the new loans increase.
• The state council, or the cabinet, slashed the minimum capital requirements for fixed-asset investment projects at the end of last month, lowering the threshold of infrastructure construction projects and increasing the demand for loans.

China’s Transfer of Shares Is Positive, Citic Says

• China’s decision to order companies listed since 2006 to transfer some of their state-held shares to the national pension fund may support the equity market, according to Citic Securities Co.
• The move is “fairly positive,” and the pension fund will act as a stabilizing force for stocks, analysts at the country’s biggest listed brokerage, led by Yu Jun, wrote in a report published today.
• The new rules, announced by the Ministry of Finance on June 19, require the transfer of 8.4 billion state-held shares in 131 listed companies, and the stocks will be barred from trading for another three years after existing lock-up periods expire.

China refines more crude oil in May, hits record high

• China refined a record 31.19 million tonnes of crude oil in May, up 10.7% over the same month last year, according to the China Petroleum and Chemical Industry Association (CPCIA).
• The CPCIA on Monday released figures that showed refined oil output, including gasoline, diesel and kerosene, totaled 19.34 million tonnes, an increase of 16.7% over the same period last year.
• Sales of refined oil topped 18.32 million tonnes in May, up 2.3% from April, with gasoline sales up 2.9% year on year, or 3.6% from April, to hit 5.61 million tonnes.

China Minsheng Wins Investor Approval for Hong Kong Share Sale

• China Minsheng Banking Corp., the nation’s first privately owned lender, won investor approval to revive an initial share sale in Hong Kong after shelving the plan for four years.
• Minsheng Chairman Dong Wenbiao got the go-ahead for the sale at a shareholder meeting today in Beijing, where the bank is based. Minsheng plans to offer stock equivalent to as much as 15% of its enlarged share capital, and may boost the sale by 15% if there’s enough demand.
• UBS AG, Switzerland’s biggest bank by assets, will help manage the stock sale, people familiar with the matter said last week. Minsheng aims to complete the offering by the end of the year barring any “unusual circumstances,” Liu Minwen, director of the capital financing office, told shareholders today.

China’s Stock Index Gains for Fourth Day; ICBC, Ping An Climb

• China’s benchmark stock index rose, led by financial companies, after the Shanghai Securities News said new lending rose and the government required some state- owned companies to transfer stock to the national pension fund.
• Industrial & Commercial Bank of China, the country’s biggest lender, added +3.1%. Ping An Insurance, the nation’s second-largest insurer, gained +3.4% on speculation the requirement will boost its equity investments. Suning Appliance rose +1.4% after saying it plans to sell new shares in a private placement.
• “The confidence and market momentum are still there,” said Yan Ji, who helps oversee about $850 million of investments at HSBC Jintrust Fund Management Co. in Shanghai. “For the national pension fund, it will play a role of stabilizing the market because the fund isn’t unlikely to sell the shares.”

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,060	138.62	0.77%
Shanghai Composite	2,896	15.81	0.55%
Shenzhen Component	11,191	-51.58	-0.46%
TAIEX	6,341	110.06	1.77%
CNY/USD	6.8352	-0.0024	-0.04%

Source: China Economic Scan

22 June 2009 | China Economic Scan

22-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Wen says China should have 'moderately loose' monetary policy, China state firms profits fall 30.3%, China increases cigarette tax, Suning Appliance to raise 3 bln yuan in private placement, Franklin Templeton renews Chinese investment license.

Top 5 headlines

China Should Have ‘Moderately Loose’ Monetary Policy

• China should have a “moderately loose” monetary policy and implement “proactive financial policies,” Premier Wen Jiabao said during a visit to Hebei.
• “We need to fully realize the stimulus measures,” Wen said, according to the statement. “We should focus on structural adjustment while maintaining economic stability and relatively fast growth.”
• Wen “is trying to maintain optimism while acknowledging risks,” David Cohen, head of Asian forecasting at Action Economics in Singapore, said over the phone today. “Global demand will start to pick up and that should provide some boost to Chinese manufacturing.”

China Jan-May state firm profits down 30.3 pct y/y

• Profits at Chinese state-owned enterprises (SOEs) continued to fall in the first five months from year-earlier levels, but the pace of decline slowed from the first four months, an official newspaper said on Saturday.
• Overall profits of SOEs in the first five months reached 425.4 billion yuan ($62.3 billion), down 30.3% from a year earlier, compared with a drop of 32.3% in the first four months, the Securities Times quoted the Ministry of Finance as saying.
• Among them, enterprises controlled by the central government registered profits of 331.55 billion yuan from January to May, down 23.3% year on year, while those backed by local governments had profits of 93.85 billion yuan, down 47.4%.

China increases cigarette tax to add to state coffers

• China has increased tax on cigarettes by between 6-11% to tap additional revenue for for future government spending.
• The tax rise took effect from the beginning of May 1, and a new tax of 5% was also imposed on cigarette wholesalers, China State Administration of Taxation said in a statement posted on its Web site (www.chinatax.gov.cn) on late Friday.
• "This is to appropriately increase the government's fiscal revenue and also to perfect the cigarette taxing system," it said. The tax has not yet been passed on to smokers.

China's Suning to raise 3 bln yuan in placement

• Chinese retailer Suning Appliance said on Saturday that it intended to raise around 3 billion yuan ($439 million) in a private placement for purposes including building new chain shops around China.
• Suning planned to issue up to 200 million new yuan-denominated A shares to private investors, including its chairman Zhang Jindong, it said in a statement published in the China Securities Journal.
• Proceeds would also be used to build six logistics centres in Chinese cities including Beijing and Tianjin and to supplement working capital, it said.

Franklin Templeton Gets Chinese Investment License

• Franklin Resources Inc., manager of the Franklin and Templeton mutual funds, said it received a new license to invest in Chinese stocks and bonds after an earlier permit held by a unit expired.
• Franklin Templeton will also invest in China through private-equity and its joint venture in the world’s third- largest economy, the statement said. It will also buy shares of Chinese companies traded in Hong Kong, it added.
• Citigroup Inc., Goldman Sachs Group Inc. and HSBC Holdings Plc are among more than 80 overseas institutions cleared to invest in Chinese stocks and bonds under the so-called QFII program.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,921
Shanghai Composite	2,880
Shenzhen Component	11,242
TAIEX	6,231
CNY/USD	6.8376

Source: China Economic Scan

20 June 2009 | China Economic Scan

20-June-2009

China Economic Scan - Your daily update on the Chinese economy.

In this edition: Report says no change to tax threshold, CDB posts 20.8bln yuan in net profit for 2008, CIC to invest $500m in hedge funds, China securities regulator approves Sanjin IPO, Chinese stocks rise again to close the week up.

Top 5 headlines

Experts push for raising tax threshold

• The first ministerial review of the country's income tax system has recommended that the current tax threshold be maintained, despite repeated calls to raise the level to ease the burden on a growing number of middle-income families and stimulate domestic consumption amid the economic downturn.
• China's personal monthly income tax threshold was increased from 800 yuan ($117) a month in 1980 to the current 2,000 yuan, meaning that workers with a monthly salary of 2,500 yuan or less do not pay any taxes after social insurance deductions.
• Presently, those earning 10,000 yuan a month will pay 825 yuan of tax.

CDB posts 20.8b yuan in net profit last year

• China Development Bank (CDB) posted a net profit of 20.8 billion yuan ($3.04 billion) in 2008, faring far better than the other two major policy banks in China despite a drop of 28% from a year earlier.
• The decline was due to the influence of the Sichuan earthquake, the economic downturn, and the exchange loss over a weak US dollar, the bank said in its 2008 annual report.
• CDB received $20 billion worth of capital funds at the end of 2007, which sharply increased its dollar position in 2008, leading to a greater exchange loss amid the depreciation of the US dollar.

CIC Said to Invest $500 Million in Hedge Funds, Blackstone

• China Investment Corp., the nation’s $200 billion sovereign wealth fund, may invest as much as $500 million in hedge funds including those run by Blackstone Group LP, said two people familiar with the matter.
• CIC aims to allocate $6 billion to hedge funds by the end of 2009, company adviser Felix Chee said two days ago at the GAIM International hedge fund conference at Monaco’s Grimaldi Forum.
• Chee, who is a special adviser to the chief investment officer of CIC, said he will initially run CIC’s hedge fund and proprietary trading effort.

China Permits First IPO Since September; Brokers Gain

• China approved its first initial public offering since September, triggering gains in brokerage shares on speculation the ending of the 10-month moratorium will spur fee income and trading.
• Sanjin, China’s biggest producer of herbal lozenges, aims to raise about 634 million yuan ($93 million). The company will start a roadshow and seek a price for the sale on June 22, it said in a statement late yesterday.
• Zhejiang Wanma Cable Co. and Shenzhen Salubris Pharmaceuticals Co. are also likely to get final IPO approval soon, the people said. The companies each plan to raise less than 650 million yuan, according to documents they’ve filed with the regulator.

China's stocks rise to 10-month high

• China's stocks rose for the third straight day Friday, driving the benchmark index to a 10-month high as financial shares gained after the securities regulator approved the nation's first initial public offering (IPO) since September.
• Sinolink Securities rose by the daily limit of +10% to close at 21.46 yuan. Northeast Securities rose +5.65% to 31.96 yuan.
• Beijing Tiantan Biological Products Co., Ltd. advanced +6.91% to 25.52 yuan, and Dalian Merro Pharmaceutical Limited Company rose by the daily limit of +10% to close at 6.90 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,921	144.27	0.81%
Shanghai Composite	2,880	26.59	0.93%
Shenzhen Component	11,242	90.66	0.81%
TAIEX	6,231	86.62	1.41%
CNY/USD	6.8376	0.0021	0.03%

Source: China Economic Scan