China Economic Scan Weekly Economic Review - 31 May 2009

China Economic Scan Weekly Economic Review - 31 May 2009

31/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

In the week that was, the Chinese government revealed more statistics about spending of the stimulus package, and encouraged its local governments to match spending. Elsewhere growth forecasts were raised, energy prices were touted to increase and signs of gold fever stirred.

China's central government has allocated 270 billion yuan (US$39.7 billion) for infrastructure investment so far this year, according to the National Development and Reform Commission (NDRC). The spending is part of a planned total of 367.6 billion yuan in the 2009 central budget and brings the total already allocated since Q4 2008 to 300 billion yuan.

China has urged its local governments to cough up funds so that projects in its 4-trillion-yuan ($586 billion) stimulus plan can be completed on time. Estimates are that local governments will need to raise 170 billion yuan to match the central government's first two batches of investment of 230 billion yuan. Previously a National Audit Office report found that "only 48% of the funds local governments had to contribute for 335 projects are in place".

That said, China’s growth prospects have apparently improved from three months ago, this is in spite of drops in steel and electricity output and the risk of a manufacturing contraction this month. The world’s third-largest economy will expand 7.5% this year, according to a median estimate of 14 economists surveyed by Bloomberg News, up from an earlier forecast of 7.1% in February this year.

Internationally, China is looking to increase investment from multinational corporations, Vice Premier Li Keqiang said. "We continue our opening-up policy and oppose trade protectionism in any form," Li told visiting GE Chairman and Chief Executive Officer Jeff Immelt, saying that China offered opportunities for multinationals to expand their business and investment. Li said the government is trying to foster the development of high-tech and strategic emerging industries.

China, the world’s second-biggest energy user, may raise gasoline and diesel prices by about 10% by next weekend. “We believe China is forced into a corner” and will raise prices “as soon as this weekend, and if not, very likely by next weekend following OPEC’s strong resolve to support higher oil prices,” said Gordon Kwan, the head of energy research at Mirae Asset Securities in Hong Kong.

In signs of gold fever hitting China, gold prices quoted on the Shanghai Gold Exchange (SGE) increased by an average 6.74% in the past month to the current level of about 209 yuan a gram. "Gold demand in China in the first quarter rose to 114 tons, up 2% over the same period last year, solely boosted by an increase in jewelry demand," according to the World Gold Council. The report also noted that global demand for gold rose 38% year-on-year to 1,016 tons. China is the world's second largest gold consuming country after India.

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 - 31 May 2009

China Economic Scan Weekly Stockmarket Review - 31 May 2009

31/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

Chinese stocks closed the week up; the Hang Seng lead by a whopping 6.5% at 18,171, the TAIEX followed with 2.27%, Shanghai closed up 1.36% to 2633 and Shenzhen was up 0.55% to 10,128.

The gains put the Shanghai index up 45% so far this year, with gains for each of the first 5 months of this year. "Ample liquidity and optimism about economic recovery have contributed to the monthly rally," said Wang Peng, Shanghai-based chief investment officer at First Trust Fund Management Co. "The gains may not last if we fail to see more good economic and corporate data."

In a very interesting development, the China Securities Regulatory Commission (CSRC) said it would end a de facto suspension of initial public offerings (IPOs) on the Shanghai and Shenzhen stock exchanges as of June 5. The CSRC effectively suspended all new stock issues last September, as it halted approvals. New guidelines issued by the CSRC aim to improve the price discovery function of the stock market, and help retail investors subscribe to newly issued stocks.

Enjoyor Technology Group is preparing for listing on the to-be-established Growth Enterprise Board (GEB) of the Shenzhen Stock Exchange (SSE), said an executive of the Chinese intelligentization solution provider. Intel Capital, the investment arm of Intel Corporation invested in the company earlier this year. The company was built in Hangzhou Hi-tech Industry Development Zone, and is engaged in building of intelligent traffic, medical, educational, security, financial and office systems.

Tingyi (Cayman Islands) Holding Corp., China’s biggest maker of packaged food, said profit climbed 43% to a quarterly record on higher instant-noodle and beverage consumption in the world’s third-largest economy. Q1 net income rose to $93 million, from $65 million a year earlier. Sales increased 21% to $1.18 billion. Instant noodle sales gained 12% to $587.7 million in and beverage sales rose 37% to $525 million, Tingyi said.

Xinao Gas Holdings, a distributor of piped natural gas in Mainland China, Executive Director Wilson Cheng said sales would rise by at least 25% each year until 2014. Xinao aims to sell 2.8 billion cubic meters of gas this year, compared with 2.2 billion in 2008. Xinao, based in Hebei province in northern China, forecasts it will connect 750,000 more households to the gas network this year, up to a total of 4.5 million.

Bain Capital may buy as much as 20% of Gome Electrical Appliances Holdings, China’s second-largest electronics retailer, for about $500 million. Bain is apparently competing for Beijing-based Gome with KKR & Co. and Warburg Pincus. Gome’s more than 800 stores in at least 160 Chinese cities make it an attractive target for investors faced with stagnant economies in the U.S., Europe and Japan.

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 Debt Market Review – 31 May 2009

China Economic Scan Weekly Debt Market Review – 31 May 2009

31/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

The CSI Enterprise Bond Index started on Monday at 118 even, and dipped down to lows of 117.60, before closing the trading week up at 118.10 on Wednesday. The Shenzhen Corporate Bond Index started the week at 130.77, dropped to a low of 130.47, and rallied to close the short week up at 130.85.

China's Ministry of Finance (MOF) said it would issue 16.9 billion yuan (US$2.48 billion) of 3-year local government bonds on behalf of 4 provinces and municipalities at a fixed annual coupon rate of 1.67%. The amounts were 3.5 billion yuan for Guangxi Zhuang Autonomous Region, 5.6 billion yuan for Beijing city, 4 billion yuan for Shanghai city and 3.8 billion yuan for Henan Province.

Chinese credit rating agency, Dagong Global Credit Rating, one of the first domestic rating agencies in China, announced the launch of its sovereign credit rating standards. It said credit risks will asses a country's political environment, economic power, fiscal status, foreign debt and liquidity, adding that it judges the credit of a sovereign entity on the basis of a comprehensive evaluation of its fiscal strength and foreign reserves.

SOHO China, the biggest property developer in Beijing's Central Business District, said the proceeds from a $359 million 5-year convertible bond issue, with a coupon rate of 3.75% a year, would be earmarked for general corporate purposes and strategic acquisitions. The bonds will be convertible into 476.2 million ordinary shares, accounting for 8.4% of SOHO's enlarged share capital.

China Construction Bank, the world’s 3rd-largest lender by market value, rose in Hong Kong trading after the company’s largest government shareholder raised its stake and promised to buy more shares. The Beijing-based company has acquired about 57.8 million Shanghai-traded shares of Construction Bank over the past 6 months at a price range between 3.71 yuan and 4.18 yuan a share, according to yesterday’s statement.

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