China Economic Scan - Your daily update on the Chinese economy.
In this edition: CLSA PMI rises to a 9 month high, Chinese listed companies report profits up 450% in Q1, Li & Fung to raise $350m in secondary equity offering, Sohu doubles Q1 net profit, Chinese stocks finish up over 3.3% on Monday.
Top 5 headlines
China on road to recovery, new survey suggests
- An index based on a survey of industry executives conducted for Hong Kong-based brokerage CLSA rose to a nine-month high of 50.1 in April from 44.8 in March.
- It was the first time since July 2008 that the Purchasing Managers' Index (PMI), designed to provide a timely snapshot of manufacturing conditions, has been above 50 (indicating expansion).
- "China's government has been extremely successful in stimulating investment and, combined with a sharp improvement in export orders, this has pushed the PMI back into positive territory in April," said Eric Fishwick, head of economic research at CLSA.
Chinese listed companies net profit up 450% in Q1
- The combined net profit of the 1,624 listed companies in the Chinese mainland dropped 25.81% YoY (up 450.39% from the last quarter in 2008) to 203.8 billion yuan (about US$30 billion) in Q1.
- 1,186 companies reported gains, making up 73.03% of the total. The number of companies reporting losses increased nearly 200% to 438 compared with the same period last year.
- "The quarter-on-quarter profit surge showed production began to stabilize in the first three months after taking the major blow from the global financial crisis in the fourth quarter last year," said Qin Xiaobin, chief analyst with Beijing-based Galaxy Securities.
Li & Fung to Sell $350 Million Stock for Acquisitions
- Li & Fung Ltd plans to raise about $350 million, selling stock at a range between HK$22.55 and H$23.38 per share to institutional investors. Citigroup and Goldman Sachs are managing the sale.
- The sale would be the largest secondary stock offering by a listed company in the city since the HK$2.96 billion ($382 million) sale by Champion Real Estate Investment Trust, Hong Kong’s first prime office property trust, in May 2008.
- Li & Fung is raising capital to finance potential acquisitions and strengthen its balance sheet. Li & Fung last traded up 9.09% at HK$24.
Sohu First-Quarter Net Doubles on Ads, Online Games
- Sohu.com Inc said Q1 earnings jumped 106% to $44.6 million (beating analyst estimates of $40.3 million), or $1.15 a share, from $21.6 million, or 55 cents, a year earlier, Sohu said today in a statement.
- Changyou, 68.5%-owned by Sohu, said Q1 profit more than doubled to $33.5 million, according to a separate statement today. Revenue, mostly sales from the Tian Long Ba Bu role-playing game, increased 50% to $61.6 million.
- China added 16.2 million Web users in the first quarter to a total of 316 million. Sohu last traded up +2.38% at $58.10, Changyou last traded up+6.07% to $34.10 versus its IPO price of $16.
China stocks rise 3.3 pct to nine-mth closing high
- Chinese stocks jumped on Monday with the Hang Seng +5.54% at 16,381.05, Shanghai Composite +3.32% at 2,559.91, Shenzhen Component +4.18% at 9,899.67
- China Shenhua Energy +7.93% to 26.69 yuan, Jiangxi Copper +6.07% to 25.70 yuan. Steel industry leader Baoshan Iron and Steel climbed +4.50% to 6.04 yuan, Guangzhou Steel +10% daily limit to 4.73 yuan after saying it had set up a venture with Linde.
- Property sector leader China Vanke advanced +3.77% to 8.80 yuan. Analysts said China's property market may have finally found a floor, with steep price falls having come to an end while sales were recovering. Drugmakers were mixed China Animal Husbandry Industry -1.50% to 23.00 yuan after rising 20% over the previous 4 sessions.
Financial Indicators:
| USD/CNY | Hang Seng Index | Shanghai Composite | Shenzhen Component |
| 6.8273 | 16,381.05 (+5.54%) | 2,559.91 (+3.32%) | 9,899.67 (+4.18%) |
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