9 May 2009 edition | China Economic Scan

9-May-2009

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

In this edition: China car sales hit record in April, Shenzhen stock exchange releases draft rules for GEM, Citic-prudential to list A-shares in 2012, China Merchants Energy to issue 4 bln yuan bond, Chinese stocks rise again - close the week up strongly.

Top 5 headlines

China car sales at record, but automaker profits weak

• China's passenger car sales in April rose 37.4% from a year earlier to a record high of 831,000 units, the country's official industry association said, bolstered by government stimulus measures.
• "A lot of the volume was coming from compact cars and mini vans as buyers for such models could get tax incentives or subsidies. And small cars mean thin margins," said Chen Qiaoning, an analyst with ABN AMRO TEDA Fund Management.
• "Beijing's stimulus policies are having a longer-lasting effect than expected," said Qin Xuwen, an analyst with Orient Securities. "As long as volume continues to grow, which is quite likely given the records in March and April, and there is no sudden spike in commodity prices, bottom lines of automakers will improve this year."

China Exch Releases Draft Listing Rules For Nasdaq-Style Mkt

• The Shenzhen Stock Exchange issued Friday draft listing rules for the Growth Enterprise Market, taking a major step toward launching the country's first Nasdaq-style stock market.
• SZSE published an 111 page long public consultation document. Highlights of the draft rules include a lower threshold for delisting compared with stocks trading on the main boards of the exchanges in both Shanghai and Shenzhen.
• There has been speculation among analysts and investors that the GEM, a marketplace tasked to nurture cash-hungry innovation-driven startup firms, could be launched as early as June.

CITIC-Prudential Life Insurance mulls A-share listing in 2012

• CITIC-Prudential Life Insurance Co Ltd, a joint venture (JV) equally-owned by state-owed China's CITIC Group and Prudential Plc of Britain, intends to launch an A-share listing in 2012.
• CITIC-Prudential has been posting losses since its establishment in October 2000. As of the end of last year, it might have registered a net loss of about RMB 200 million.
• Citic Prudential earned Q1 premium income of RMB 220 million, achieving 90% of its target for the period. At the beginning of this year, the company set a goal of RMB 1.3 billion, 30% more than RMB 1 billion it realized in 2008.

China Merchants Energy to issue 4 bln yuan bond

• The parent of China Merchants Energy Shipping Co said on Friday it will issue 4 billion yuan ($586.5 million) of 10-year corporate bonds from May 8 to 14.
• The bonds will pay a coupon of 4.35%, which was derived from a spread over the one-year Shanghai Interbank Offered Rate (SHIBOR), and are rated AAA by China Chengxin Ratings Agency.
• Proceeds will be used for container terminal construction projects in Shenzhen, Ningbo and Qingdao.

China’s Stocks Rise for Seventh Day; China Cosco Advances

• Chinese stocks rose again, finishing the week up. The Hang Seng closed Friday up 1% at 17,390, the Shanghai Composite up 1.09% to 2,626, and Shenzhen Component up 0.73% to 10,183.
• China Cosco +3.9% to 13.32 yuan. China Shipping +1.1% to 14.11 yuan. The Baltic Dry Index +6.3% to 2,194 points yesterday, according to the Baltic Exchange. “Shipping rates are likely to continue to rebound as lots of infrastructure projects will start now and increase the demand for commodities,” said Zhang Xiuqi, a strategist at Guotai Junan Securities.
• Vanke +7.9% to 9.84 yuan. Shenzhen Airport +5.8% to 7.09 yuan. COFCO Property, the property unit of the country’s biggest grain trader, +10% to 7.68 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,390	171.98	1.00%
Shanghai Composite	2,626	28.2	1.09%
Shenzhen Component	10,183	74.12	0.73%
TAIEX	6,584	11.00	0.17%
CNY/USD	6.8265	0.0002	0.00%

Source: China Economic Scan

China Economic Scan Weekly Debt Market Review – 8 May 2009

China Economic Scan Weekly Debt Market Review – 8 May 2009

8/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

The CSI Enterprise Bond Index started the week at 117.36 and crept up slightly to 117.41. The Shenzhen Corporate Bond Index started the week at 130.84 and declined steadily during the week, hitting a low of 130.40, and ending at 130.49.

China's Ministry of Finance (MOF) said Wednesday it would issue 27.76 billion yuan (4.06 billion U.S. dollars) of book-entry treasury bonds this week. The 10-year bonds have an annual interest rate of 3.02%, with payments half yearly; and the issue period will run May 7-11.

The MOF also said it would issue 50 billion yuan worth of T-bonds next week. The bonds include 40 billion yuan worth of 3-year bonds that carry a fixed annual interest rate of 3.73% and 10 billion yuan of 5-year bonds with a 4.00% annual interest rate.

The PBOC will step up its bill issuance in its open market operations in Q2 to at least 1 trillion yuan ($146.6 billion) to control the money supply, a market association forecast in its first-quarter report. That would mark a sharp rise from 560 billion yuan of bills the bank sold in Q1 and compares with a total of 951 billion yuan in central bank bills and 790 billion yuan in short-term bond repurchase agreements due to mature in Q2.

The PBOC will drain 80 billion yuan ($11.7 billion) from the money market on Tuesday through 28-day bond repurchase agreements, traders said. 193 billion yuan in central bank bills and repos is due to mature this week. Last week, the central bank net-injected 17 billion yuan into the market.

PetroChina, the world's second largest company by market value, said it may need as much as 150 billion yuan (US$22 billion) in funds during 2009 to boost cash flow and maintain CAPEX and dividends. PetroChina raised 50 billion yuan through bank borrowings and a bond issue in Q1 and is seeking shareholder approval for another 100 billion yuan.

China Merchants Group, parent company of China Merchants Energy Shipping announced plans to issue 4 billion yuan ($586.5 million) of 10-year corporate bonds from May 8 to 14, which will pay a coupon of 4.35%. China Chengxin Ratings Agency assigned an issuer and bond rating of AAA. Funds raised from the issue will be used for container terminal construction projects in China.

China's new bank lending in April was likely above 600 billion yuan ($87.8 billion), sharply lower than the record trillion-plus yuan loans in earlier months this year. New loans in March totaled 1.9 trillion yuan ($220 billion), with new lending for the first quarter totaling 4.58 trillion yuan ($670.6 billion).

China Economic Scan is a leading provider of daily updates on the Chinese economy and financial markets. China Economic Scan focuses on bringing you the facts from the hundreds of articles that compete for your attention each day. You save time and due to our willingness to probe further and add value with additional facts and research; you get an edge in staying on top of the key developments in the world’s 3^rd largest economy. For more info visit www.chinaeconomicscan.com

China Economic Scan Weekly Stockmarket Review

China Economic Scan Weekly Stockmarket Review – 8 May 2009

8/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

Chinese stocks had a phenomenal week with the Hang Seng leading the charge, up 12.04% since the end of last week, at 17,389.87. Taiwan closely followed, powered by speculation of cross-strait M&A, the TAIEX index rose 9.87% to 6,583.87. Mainland stocks also climbed, with the Shanghai Composite up 5.98% week on week to 2,625.65, and the Shenzhen Component up 7.16% to 10,183.06.

The combined net profit of the 1,624 listed companies in the Chinese mainland dropped 25.81% year on year in the first quarter (but was up 450.39% from the previous quarter) to 203.8 billion yuan. 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.

China Galaxy Securities said China is at risk of a stock market “bubble” that may burst as investor confidence in the nation’s economic recovery weakens and bank lending slows. The Shanghai Composite Index has charged up 50% since last year’s low on Nov. 4, driving valuations on the index to 27.2 times earnings.

Statistics from China Securities Depository and Clearing Corp indicated that at the end of last year, institutional investors held 54.62% of the market value of all tradable A shares, versus 48.71% a year earlier. Stock values held by individual investors accounted for an overwhelming 69.87% at the end of 2005.

On the topic of capital raising, the first listing on China's new Growth Enterprise Board (GEB) is expected in August, with 18 tech-related companies based in Zhongguancun set to list.

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. Li & Fung is raising capital to finance potential acquisitions and strengthen its balance sheet.

On results, Sohu.com 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. Changyou, 68.5% owned by Sohu, said Q1 profit more than doubled to $33.5 million. Revenue, driven primarily by sales from the Tian Long Ba Bu role-playing game, increased 50% to $61.6 million.

Alibaba's Q1 profit fell 16% to 253.4 million yuan (about US$37 million, and above analyst estimates of 201 million yuan) after sales and marketing costs rose 43%. Alibaba is considering international acquisitions as it aims to derive one third of its revenue from overseas customers in 3-5 years, from about 2% at present.

Guangzhou R&F Properties said its contracted sales in April jumped 80% from a year earlier to 2.34 billion yuan ($343 million) and it was confident of achieving its interim sales target.

China Economic Scan is a leading provider of daily updates on the Chinese economy and financial markets. China Economic Scan focuses on bringing you the facts from the hundreds of articles that compete for your attention each day. You save time and due to our willingness to probe further and add value with additional facts and research; you get an edge in staying on top of the key developments in the world’s 3rd largest economy. For more info visit www.chinaeconomicscan.com