China Economic Scan: Jun 25, 2009

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.”

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