China Economic Scan - Your daily update on the Chinese economy.
In this edition: Chinese PMI comes in at 53.1 for May, NDRC says gasoline and diesel benchmark retail prices to rise, Melco opens $2bln casino in Macau's Cotai strip, academics and industry practitioners say derivatives not a bad thing, Chinese stocks jump 3% on Monday.
Top 5 headlines
Chinese Manufacturing Grows, Adding to Evidence of Recovery
- The official Purchasing Manager’s Index (PMI) was at a seasonally adjusted 53.1 in May after registering 53.5 in April, the Federation of Logistics and Purchasing said.
- A reading of the PMI above 50 indicates an expansion.
- Industrial production growth may accelerate to 8% this quarter as stimulus spending gathers momentum, up from 7.3% last month and 5.1% in the first three months, the Ministry of Industry and Information Technology said May 22. Output may increase 10% in the second half, it added.
China to raise gasoline, diesel benchmark retail prices
- China will raise gasoline and diesel benchmark retail prices by 400 yuan (58.6 U.S. dollars) per tonne as of Monday, the National Development and Reform Commission (NDRC) said.
- The benchmark retail price for gasoline would increase by 7% and the price of diesel by 8%, according to the NDRC
- According to the new mechanism, China's domestic fuel prices are to be "indirectly linked" to global crude prices "in a controlled manner." China would adjust domestic fuel prices when global crude prices reported a daily fluctuation band of more than 4 percent for 22 working days in a row.
Melco Opens $2 Billion Casino in Macau’s Cotai Strip
- Melco Crown Entertainment Ltd. opens its City of Dreams casino today in a $2 billion bet that Macau will rebound from a slump that prompted rival Las Vegas Sands Corp. to halt construction on a neighboring project.
- The complex on Macau’s Cotai Strip has 516 gambling tables in a 420,000-square-foot casino, Hard Rock and Grand Hyatt hotels as well as a multimedia theater and shops run by DFS.
- “The gaming sector had a very bad year in 2008 because of a weakening Macau economy,” Winson Fong, who helps manage $2 billion at SG Asset Management H.K. Ltd., said. “Now, people are buying into the sector because as a speculative one, it tends to perform better during a recovery,”
'Let more firms trade in futures'
- Allowing more Chinese companies to trade in the international futures market is a better solution to protect State-owned enterprises (SOEs) from potential losses in overseas derivatives trading than simply blaming the investment banks that offer these products, experts said.
- Despite the fact that some SOEs have suffered enormous losses, derivatives continue to be a very important financial instrument for large corporations around the world, including Chinese companies, to hedge business risks, Hu Yuyue, a futures professor at Beijing Technology and Business University.
- According to the professor, a report from the International Swaps and Derivatives Association (ISDA) indicated that over 94% of Fortune 500 companies use derivatives as a tool to manage risks.
China Stocks Rise Most in Three Months as Manufacturing Expands
- Chinese stocks recorded strong gains with the Hang Seng up 3.95% at 18,889, the Shanghai Composite up 3.36% to 2,721, and the Shenzhen Component up 2.90% to 10,421.
- “The pick-up in the economy is better than expected and that’s giving investors a strong reason to buy,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which manages about $285 million.
- Jiangxi Copper, the country’s biggest producer of the metal, surged +9.1% and Industrial & Commercial Bank of China gained +3.7%. PetroChina climbed +4.9% after China increased fuel prices and crude oil rose to a 7-month high. China Vanke added +4.3% after the government eased requirements for real-estate projects.
Financial Indicators:
Metric | Value | Point change | % change |
Hang Seng Index | 18,889 | 717.59 | 3.95% |
Shanghai Composite | 2,721 | 88.35 | 3.36% |
Shenzhen Component | 10,421 | 293.43 | 2.90% |
TAIEX | 6,954 | 63.66 | 0.92% |
CNY/USD | 6.8271 | -0.0054 | -0.08% |
Source: China Economic Scan
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