14 May 2009 Edition | China Economic Scan

14-May-2009

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

In this edition: China's factory output grows 7.3% in April, China Eastern Airlines gets further capital injection from SASAC, CNOOC-BG group sign agreement for Aus LNG project, Sanlu company sells for 7.3m yuan, Chinese stocks close at 9 month high.

Top 5 headlines

China’s Factory Output Grows Less-Than-Estimated

• Output rose 7.3% from a year earlier, the statistics bureau said today, after gaining 8.3% in March, and less than analyst estimates of 8.6%.
• Retail sales grew 14.8%, above estimates of 14.5% (and 14.7% in March).
• The data adds to evidence that a 4 trillion yuan ($586 billion) stimulus plan is buoying domestic growth, while the global recession takes a toll on exports and related industries.

China Eastern gets another 2b yuan injection

• China Eastern Airlines has secured another two billion yuan ($293 million) injection from the State-owned Assets Supervision and Administration Commission (SASAC).
• Last year, the central government injected 7 billion yuan and 3 billion yuan into China Eastern and its bigger rival China Southern Airlines, respectively, in a bid to help the troubled airlines to weather the financial crisis.
• It is rumored that the new injection will be used to facilitate a merger between China Eastern and Shanghai Airlines.

CNOOC, BG group sign agreement for Australian LNG project

• China National Offshore Oil Corp (CNOOC) signed an agreement with UK-based BG Group involving a liquefied natural gas (LNG) development project in Queensland, Australia.
• Under the agreement, CNOOC would buy 3.6 million tons per annum (mtpa) of LNG for 20 years
• The project would come on line in 2014 with two liquefaction trains providing 7.4 mtpa capacity.

Sanlu brings 7.3m yuan at auction

• The brand of Sanlu Group, the dairy company embroiled in China's tainted-milk scandal, was sold at an auction Tuesday for 7.3 million yuan ($1.07 million), court officials said.
• An unidentified individual entrepreneur from south China won the bid at an auction in the Shijiazhuang Intermediate People's Court in northern Hebei province.
• Beijing-based dairy producer Sanyuan bought the core assets of Sanlu, which went bankrupt in February, for 616.5 million yuan at an auction on March 4.

China Shares End At 9-Mo High Led By Petrochemicals,Coal Cos

• Chinese stocks reached 9-month highs with the Shanghai Composite up +1.74% to 2,664, the Shenzhen Component up +1.13% to 10,294, but the Hang Seng down -0.55% at 17,060.
• "Investors seem to have formed a consensus that any declines in the index levels represent opportunities to enter the market," said Wu Feng, an analyst at TX Investment Consulting. "It's not to say that there won't be a pullback on profit-taking in the near term though."
• Tangshan Iron & Steel was up 2.2% at CNY6.87 and Chongqing Iron & Steel rose 4.4% to CNY5.43. China Coal Energy jumped 7.1% to CNY11.71 and Hebei Jinniu Energy Resources rose 8.4% to CNY35.42. China Petroleum & Chemical ended up 3.1% at CNY10.84.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,060	-94.02	-0.55%
Shanghai Composite	2,664	45.6	1.74%
Shenzhen Component	10,294	115.22	1.13%
TAIEX	6,485	52.59	0.82%
CNY/USD	6.8270	0.001	0.01%

Source: China Economic Scan

8 May 2009 edition | China Economic Scan

8-May-2009

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

In this edition: The PBOC hints at no rate cuts for 2009, SASAC to review derivatives use by SOEs, Geely said to be one of three bidders for Ford's sale of Volvo, Alibaba shares surge after CEO comments, Chinese stocks close mixed on Thursday.

Top 5 headlines

No increase in rates, hints PBOC

• The Central bank of China has indicated that it will likely follow a moderately loose monetary policy, reducing speculation of a normalization of monetary policy.
• "The central bank will continue to ensure ample liquidity in the banking system and reasonably increase loans to fund the economy," the People's Bank of China (PBOC) report said.
• Tao Dong, chief Asia economist of Credit Suisse in Hong Kong, said "The PBOC is likely to maintain the one-year lending rate at 5.31% this year and raise it by 99 basis points only next year."

Review into investments by SOEs

• State-owned Assets Supervision and Administration Commission (SASAC) will be launching an investigation into investments made by SOEs in the financial sector as a risk management measure.
• A total of 28 SOEs, including Air China, China Eastern Airlines and China COSCO Holdings Co, have invested in financial derivatives but most of them suffered losses. Air China lost 7.5 billion yuan on fuel-hedging contracts, and China Eastern 6.4 billion yuan.
• Li Wei, vice director of SASAC said "SOEs which plan to invest in financial derivatives must meet 4 conditions - abiding by hedging rules, hiring financial institutions for consultation, controlling risks and getting the commission's approval."

Ford Volvo Sale Said to Accelerate; Geely Sees Books

• China's biggest privately owned automaker Geely Holding Group has sent a team to Volvo's factory in Sweden to look over the books as Ford seeks to sell. There is apparently to other bidders also.
• Ford is seeking about $2 billion for Volvo, less than a third of what it paid for the maker of station wagons a decade ago.
• Geely Automobile Holdings, Geely’s listed unit, rose +14%, the most in 3 months, to close at HK$1.34 in Hong Kong trading. The stock has more than doubled this year, compared with the benchmark Hang Seng Index’s +20% gain.

Alibaba Shares Rise After CEO Says Stock Undervalued

• Alibaba stock surged as CEO David Wei said the shares were undervalued. Everbright Securities also raised Alibaba to "buy" from "reduce", also recently Citigroup raised it to a "buy" from "sell" and JPMorgan Chase raised it to "neutral" from "underweight".
• Alibaba's Q1 profit fell 16% to 253.4 million yuan ($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. Alibaba rose +15% to close at HK$11.74 on Thursday.

China shares mixed after 5 day rally

• Chinese stocks were mixed on Thursday, the Hang Seng was the leader surging a further +2.28% to 17,218 the Shanghai Composite was basically flat +0.19% at 2,597 and the Shenzhen Component eased back but is still above 10k, -0.40% to 10,109.
• Coal miners extended gains, with Datong Coal Industry +5.3% to 35.3 yuan and Anhui Hengyuan Coal Industry +3% to 22.74 yuan.
• Financials were boosted by a central bank report. Industrial & Commercial Bank of China, +0.9% to 4.28 yuan; Bank of China +0.6% to 3.59 yuan and China Construction Bank +2% to 4.61 yuan.

Financial Indicators:

Metric	Value	Point change	% change
Hang Seng Index	17,218	383.32	2.28%
Shanghai Composite	2,597	4.93	0.19%
Shenzhen Component	10,109	-40.13	-0.40%
TAIEX	6,573	6.17	0.09%
CNY/USD	6.8263	0.0037	0.05%

SOURCE: China Economic Scan