16 June 2009 | China Economic Scan

16-June-2009

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

In this edition: Foreign direct investment fell 17.8% in May, Home sales on the rise in China, KKR said to pay $150m for China Modern Dairy stake, VC deals showing signs of life in China, Chinese stocks gain for first time in three days.

Top 5 headlines

Foreign Direct Investment in China Tumbles on Crisis

• Foreign direct investment in China fell for an eighth month from a year earlier as companies cut spending to weather the worst economic slump since the Great Depression.
• Investment slid 17.8% in May to $6.38 billion, the commerce ministry said at a briefing in Beijing today, after falling 22.5% in April.
• “Companies have just been trying to survive the crisis, I don’t think they’re in the mood for aggressive overseas expansion,” said Wang Qing, chief Asia economist for Morgan Stanley in Hong Kong. “It’s too soon to see a pick-up.”

Home sales rise, but pricing remains crucial

• According to DTZ, an international real estate consulting company, total floor space of new homes sold nationwide increased 18.6% year-on-year to 162 million sq m in the first four months this year, which was also 21.2% above the year-on-year average of 2006 to 2008.
• Analysts say the strong rebound was triggered by the government's favorable policies on interest rates and taxation, and pent-up demand from 2008.
• Statistics from the National Development and Reform Commission show that property prices in China's 70 largest cities climbed 0.4% in April, 0.2% higher than the previous month.

KKR Said to Pay $150 Million for Stake in China’s Modern Dairy

• KKR, the private equity company of Henry Kravis and George Roberts, invested $150 million in Chinese milk supplier Ma Anshan Modern Farming, two people familiar with the matter said.
• KKR completed a series of investments in the company, known as Modern Dairy, the New York-based firm said today, without providing financial details.
• The milk supplier, based in Anhui province, has about 40,000 dairy cows and produces more than 150,000 tons of raw milk a year, KKR said.

VC deals showing renewed signs of life

• Twenty-six venture capital (VC) and private equity (PE) companies invested $4.81 billion in 15 deals in May after a cautious April that registered only $156 million in total investment, the report said.
• The financial services industry attracted by far the most investment in May, some $4.64 billion, or fully 97%, of the total.
• It was one big deal in the finance sector that dramatically changed the investment mix toward financials. On May 12, PE funds led by Hopu Investment Management invested about $4.62 billion to buy 8.53 billion H shares of China Construction Bank.

China’s Stocks Gain for First Time in Three Days; Banks Rally

• The Shanghai Composite Index gained 1.7% to 2,789.55 at the close, erasing a loss of as much as 0.6%. The CSI 300 Index, which tracks shares on both the Shanghai and Shenzhen exchanges, added 2.1%, with financial stocks posting the biggest gain among the 10 industry groups.
• Industrial & Commercial Bank, the world’s largest bank by market value, advanced 5.3% to 4.94 yuan, the most since March 26. Bank of China Ltd. climbed 4.8% to 4.12 yuan.
• The restarting of public offerings after a nine-month suspension may allow as many as 32 companies to raise up to 70 billion yuan ($10.2 billion), according to estimates from Liang Jing at Guotai Junan Securities Co. Some companies may receive final approval for initial public offerings this week, China Business News reported today.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,499	-390.72	-2.07%
Shanghai Composite	2,790	45.79	1.67%
Shenzhen Component	10,769	244.83	2.33%
TAIEX	6,226	-222.67	-3.45%
CNY/USD	6.8410	0.0059	0.09%

Source: China Economic Scan

4 June 2009 | China Economic Scan

4-June-2009

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

In this edition: China says quick rebound in trade is unlikely, JP Morgan economist predicts housing price rally in China, Morgan Stanley raises Chinese stocks to 'neutral', Shanxi province plans coal futures exchange, Chinese stocks surge to 10-month high on Wednesday.

Top 5 headlines

China Says Quick Rebound in Trade Is Less Likely

• China said a quick rebound in trade is becoming less likely, with the nation’s exports and imports set to decline in the first half of this year.
• “China’s exports may start to grow as early as January after the major economies such as the U.S. and Japan gradually recover later this year,” said Xing Ziqiang, a Beijing-based economist at China International Capital Corp.
• Trade faces “unprecedented difficulties” and the outlook for the second half is not optimistic, Vice Commerce Minister Zhong Shan said in a statement about export credit insurance posted on the ministry’s Web site today. He didn’t elaborate on why a speedy recovery has become less likely.

Economist predicts housing price rally

• China's housing prices are predicted to rise by 5 to 10% this year and will keep a growth of 10% next year, Frank Gong, chief economist at JP Morgan, said.
• Hui Jianqiang, analyst of E-house China R&D Institute in Shanghai, echoed Gong's prediction as he said housing investment and sales are not in balance. "It is necessary for the government to adopt policies to lower the proportion of capital fund, in order to spur investment in real estate," Hui said.
• Urban residents have relatively high saving rates that will be sufficient to support consumption, Gong said. He added that the fast growing urban population indicates a huge domestic housing demand.

China Stocks Raised to ‘Neutral’ at Morgan Stanley

• China stocks were upgraded to “neutral” at Morgan Stanley, which said the growth in liquidity globally is boosting asset prices.
• The brokerage also increased its “base case” target for the MSCI China Index to 50.9 from 36.3, Morgan Stanley’s Hong Kong-based strategist Jerry Lou wrote in a note today. He had cut the rating on Chinese stocks to “cautious” in April.
• “A mini asset-economy upcycle, courtesy of aggressive policy-driven liquidity globally, could be developing,” Lou wrote. “Liquidity’s transference into borrowed prosperity could develop and carry the current market rally beyond 2009.”

Shanxi plans coal futures bourse

• Shanxi province, China's largest coal producer, said it has plans to establish the country's first coal and coke futures exchange to help stabilize the domestic market and secure a bigger voice in international pricing.
• "We have submitted a feasibility study to the authorities with the aim of establishing the market in 2012," said Wang Hua, director at the Shanxi provincial capital market development office.
• Shang Fulin, chairman of China Securities Regulatory Commission (CSRC), yesterday said at the sixth Shanghai Derivatives Market Forum that the CSRC would continue to encourage more futures products in China to help domestic enterprises hedge against financial risks.

China shares hit 10-month high, led by financials

• Chinese stocks surged again on Wednesday, the Shenzhen Component lead up +2.17% to 10,712, the Shanghai Composite rose +1.99% to 2,779, and the Hang Seng rose +1.02% to 18,576.
• Midsize lender Pudong Development Bank soared by the daily maximum of +10% to 28.73 yuan. Industrial & Commercial Bank of China, China's biggest commercial lender, soared +4.2% to 4.69 yuan. Bank of China gained +3.03% to 3.74 yuan.
• Property developers rose for a third day on hopes of a revival in China's real estate market. China Vanke, the country's biggest developer, advanced +6.1% to 10.84 yuan, while rival Poly Real Estate Group, surged +9% to 25.34 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,576	187.39	1.02%
Shanghai Composite	2,779	54.29	1.99%
Shenzhen Component	10,712	227.98	2.17%
TAIEX	6,893	-55.94	-0.80%
CNY/USD	6.8306	-0.0049	-0.07%

Source: China Economic Scan

3 June 2009 | China Economic Scan

3-June-2009

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

In this edition: Geithner says China has confidence in US economy, China to speed up nuclear power development, China alocates $878m for low-rent housing, Goldman Sachs sells shares in ICBC for $1.91bln, Chinese stocks edge up on Tuesday.

Top 5 headlines

Geithner Says China Has Confidence in U.S. Economy

• Treasury Secretary Geithner said China, the biggest holder of U.S. Treasuries, has expressed confidence in the U.S. economy and the Obama administration’s actions to fight the recession.
• “China will be shooting themselves in the foot if they push this issue too hard,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “If they are too alarmist and contribute substantially to a dollar and Treasuries sell off, they are going to feel more pain than just about anybody in the world.”
• “You have established good working relationships with your Chinese colleagues and you are committed to increasing China-U.S. cooperation in tackling the international financial crisis,” President Hu Jintao said at a meeting at the Great Hall of the People. “I appreciate that.”

Official: China to speed up nuclear power development

• China's nuclear power capacity is expected to reach about 5% of the country's total power capacity by 2020, according to National Energy Administration (NEA).
• The target is higher than the original one set in 2007, which aimed for a nuclear power capacity of 40 million kw by 2020, taking up 4% of the total power capacity.
• At present, China's nuclear power takes up 2% of the total power generation, while coal-fired power covers more than 80% of the total. 15% of world power generation comes from nuclear energy.

China allocates $878 mln for low-rent house building fund

• China's Ministry of Finance (MOF) announced Monday that the central government had earmarked the second batch of 6 billion yuan (878 million U.S. dollars) as special fund for low-rent house building projects across the country this year.
• The central government allocated the first batch of 7 billion yuan fund for this purpose in April, thus completing the goal of providing 13 billion yuan of subsidy for this year.
• Figures released on May 21 by the National Development and Reform Commission, China's top economic planner, showed that 214,000 low-rent housing units had been built by April since the government launched the 4-trillion-yuan stimulus package last November, with construction on another 650,000 units underway nationwide.

Goldman Sachs Raises $1.91 Billion Selling Shares in ICBC

• Goldman Sachs Group, which wants to return $10 billion this month to the U.S. government, raised HK$14.8 billion ($1.91 billion) by selling shares of Industrial & Commercial Bank of China after the stock jumped 29% in two months.
• The New York-based firm sold 3.03 billion Hong Kong-traded shares, or a 0.9% stake in the Chinese bank, at HK$4.88 apiece.
• “It’s very opportunistic, and obviously they’re not the first to come to the market to do that,” said Douglas Ciocca, a managing director at Renaissance Financial Corp. “It’s a prudent reallocation of capital because they still have a big remaining stake in there.”

China’s Stocks Rise to 10-Month High; Developers Lead Advance

• Chinese stocks were mixed on Tuesday with the Hang Seng falling -2.64% to 18,389, but Shanghai Composite registered a small gain of +0.11% to 2,724, and Shenzhen Component rose +0.60% to 10,484.
• Huaxia Bank, partly owned by Deutsche Bank, dropped -1.1% to 10.08 yuan. The bank said 1.58 billion shares, or 32% of its share capital, will become tradable on June 8. The stock is owned by 25 of its biggest shareholders, it said.
• Anhui Jianghuai Automobile, China’s second- biggest light-truck maker, jumped +4.3% to 6.10 yuan after yesterday’s trading suspension. The company said it has no “immediate” plan for any restructuring that involves Chery Automobile Co. Ningbo Yunsheng Group lost -3.9% to 11.14 yuan. The company said its biggest shareholder sold 3.75 million shares, or 0.95% of the company’s total.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,389	-499.51	-2.64%
Shanghai Composite	2,724	3.02	0.11%
Shenzhen Component	10,484	62.98	0.60%
TAIEX	6,949	-5.02	-0.07%
CNY/USD	6.8355	0.0084	0.12%

Source: China Economic Scan