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

China Economic Scan - Weekly Econonomic Review

China Economic Scan Weekly Economic Review – 8 May 2009

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

In the past week the major economic developments in China included comments on monetary policy by the PBOC, stats showing the CLSA PMI rising above 50 in April, estimates that new lending in April was over 600 billion yuan, and revelation that China passed the US as the top ranked trading partner with Brazil.

The Central bank of China indicated that it would follow a moderately loose monetary policy, reducing speculation of a normalization of monetary policy. A People's Bank of China (PBOC) report said. "The central bank will continue to ensure ample liquidity in the banking system and reasonably increase loans to fund the economy,"

Tao Dong, chief Asia economist at Credit Suisse, 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."

On a related note, the figure for China's new bank lending in April is likely to come in above 600 billion yuan ($87.8 billion). New loans in March totaled 1.9 trillion yuan ($220 billion), and new lending in the first quarter was 4.58 trillion yuan ($670.6 billion). "Clearly, new lending in the rest of the year at the same pace ... or half as fast ... as in the first quarter would be unthinkable and too fast," UBS economist Tao Wang said.

The Chinese yuan rose 0.16% in April, its best month this year, following a 0.09% advance in March. China allows the yuan to trade a limit of 0.5% against the dollar, on either side of the central parity rate. The yuan has traded to as much as 6.82 against the USD, and was 6.8221 at the time of writing.

The CLSA Purchasing Managers' Index (PMI) rose to a nine-month high of 50.1 in April from 44.8 in March. It was the first time since July 2008 that the PMI has been above 50 (indicating expansion). "China's government has been extremely successful in stimulating investment and, combined with a sharp improvement in export orders, this has pushed the PMI back into positive territory in April," said Eric Fishwick, head of economic research at CLSA.

Cargo throughput at the main ports across China was estimated to reach 500 million tonnes in April, down 1.9% year on year according to the Ministry of Transport (MOT). The breakdown was 340 million tonnes as domestic trade, and 160 million tonnes as foreign trade.

China replaced the United States to become Brazil’s top-ranked trading partner according to officials. The sum of Brazil's exports and imports with China reached $3.2 billion in April, greater than the $2.8 billion in its trade with the U.S.

According to Brazil's official statistics, bilateral trade volume between Brazil and China reached $36.44 billion in 2008, increasing 55.9% from 2007. Brazil's export volume to China was up 50.8% to $16.4 billion, and import volume was up 56.9% to $20 billion.

Finally, 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. The move follows derivatives losses by the likes of Air China, which lost 7.5 billion yuan on fuel-hedging contracts, and China Eastern, which lost 6.4 billion yuan.

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

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

Brazil Economic Scan | 7 May 2009

7-May-2009

Brazil Economic Scan

In this edition: Brazil wont tap sovereign fund in 2009, Brazil to buy coffee @ 23% above market price, Petrobras bets on China bankroll, Ex-Sadia executives charged with insider trading, Brazilian stocks rally for 6th day.

Top headlines

Brazil won't tap sovereign fund in 2009

• Brazil will not tap a new sovereign wealth fund for key investment projects this year even though the economy may miss an official 2% growth forecast, Planning Minister Paulo Bernardo said.
• Bernardo acknowledged that Latin America's largest economy could fall short of the government's forecast for 2% growth in 2009. Still, he expected the economy keep growing and avoid some market predictions it could contract 0.3%.
• Until the 3rd quarter of last year Brazil had enjoyed sustained growth of more than 5% a year.

Brazil to Buy Coffee Up to 23% Above Market Prices

• Brazil, the world’s biggest coffee producer, will pay growers as much as 23 percent more than the current benchmark to help push up prices, Agriculture Minister Reinhold Stephanes said.
• Brazil will buy as many as 3 million bags of arabica coffee from November to March for 303 reais ($143) to 320 reais a bag. The average paid yesterday in the country’s South of Minas region was 261.17 reais, according to the University of Sao Paulo’s Cepea research agency. A bag weighs 60 kilograms, or 132 pounds. Brazil exported about 26.1 million bags last year.
• Arabica-coffee futures for July delivery rose $0.25, or +0.2%, to $1.249 a pound today on ICE Futures U.S. in New York.

Petrobras bets on China for bankroll

• Petrobras hopes to raise a loan from the China Development Bank, its chief executive said on Tuesday, to guarantee financing in 2010-2011 for an aggressive investment plan.
• Brazil signed an agreement on February 19 to supply China with 100,000 to 160,000 barrels of oil a day in what Petrobras expects to lead to $10 billion in financing to develop its huge subsalt oil fields.
• Petrobras announced earlier in 2009 that it would boost its five-year investment plan by 55% to a whopping $174 billion, when most oil majors were trimming capital spending to brace for falling demand amid the financial crisis.

Ex-Sadia Executives Charged With Insider Trading in Brazil

• Two former Sadia SA executives were charged with insider trading by Brazilian prosecutors for purchases of Perdigao SA shares before Sadia offered to buy the rival in 2006.
• The insider-trading charge is the first in Brazil since a law that designated the practice as a crime took effect in 2001.
• Sao Paulo-based Perdigao, Brazil’s biggest food processor, rejected a takeover bid by Sadia in July 2006 and surpassed the rival after taking over Eleva Alimentos SA in October 2007. Perdigao is currently in talks to merge with Concordia, Brazil- based Sadia, the country’s 2nd-biggest food company.

Brazil Stocks Rise for Sixth Day, Longest Rally Since January

• The Bovespa advanced +1.6%, to 51,499.48, the highest since Sept. 25. The index has gained 37% percent this year, bolstered by i-rate cuts and speculation of rising commodities demand from China.
• Brazil’s Gerdau, which gets more than 25% of its profit from North America, rose +4.7% to 18.85 reais. Companies in the U.S. cut an estimated 491,000 workers from payrolls in April, less than the 645,000 expected, indicating the worst of the recession’s job losses may have passed, a private report showed today.
• Vale, which ships about 29% of its ore to China, added +0.8% to 33.15 reais. Aracruz jumped +14% to 3.61 reais, Eletropaulo Metropolitana SA, the Brazilian unit of AES Corp., rose +7.7% to 30.20 reais, Banco do Brasil SA jumped +7.7% to 21.06 reais.

Source: Brazil Economic Scan

India Economic Scan | 7 May 2009

7-May-2009

India Economic Scan

In this edition: Indian economy to grow 8% says Chief Statistician, Tata Housing starts low-cost housing project, India sugar imports in 2009 nearly complete, Indian banks raise 13.05 bln rupees via CDs, Indian stocks drop on Wednesday.

Top headlines

Indian Economy Likely To Grow 8% This Year- Chief Statistician

• Indian economy is likely to grow 8% in the current fiscal, according to chief statistician, Pronab Sen. The finance ministry projected a growth of 6% while RBI put it at 5.7% this year. IMF estimated it pessimistically below 5%.
• ABN AMRO PMI for April, released on Monday, showed India expanded after months of contraction while the output index for 6 core sectors for March released last week showed a growth of 2.9%, the highest in the last 6 months.
• Sen estimates Indian economic growth close to 6.7% for the year ended March 31, 2009 following an average growth of 8.5% for 5 consecutive years.

Tata Housing to build low-cost housing near Mumbai

• India's Tata Group launched a low-cost housing project near Mumbai, joining a spate of Indian developers that have moved to the affordable housing segment, as demand dries up for more expensive homes.
• Unlisted group firm Tata Housing Development Co said it will invest up to 1 billion rupees in a 1,200-unit township at Boisar, in the outskirts of Mumbai, and will sell apartments at prices ranging between 390,000 rupees and 670,000 rupees.
• The company will hold a lottery to allot flats and will sell application forms at 200 rupees each. The flats will be delivered in about 2 years.

India sugar imports in 2009 nearly complete

• "The bulk of the imports have already been completed," Narendra Murkumbi of Shree Renuka Sugars Ltd said at the third annual International Sugar Organization/Datagro sugar conference in New York.
• Murkumbi said "no more than 400,000 tonnes" of sugar will be brought into India in Q3 2009.
• India's sugar production is forecast to rise to 20.8 million tonnes in 2009/10, from 14.7 million to 15.0 million tonnes the previous season. Consumption is seen at 23 million tonnes.

Indian banks raise 13.05 bln rupees via CDs

• Indian banks raised 13.05 billion rupees via Certificates of Deposit (CDs) on Wednesday, Thomson Reuters data showed.
• United Bank of India (UBI) raised 4.5 billion rupees by selling 6-month notes carrying a coupon rate of 4.49%. Andhra Bank sold 2.3 billion rupees of 4.4% 6-month notes. Punjab & Sind Bank, Central Bank of India, State Bank of Patiala, IndusInd Bank, IDBI Bank, also sold CDs.
• The yield on the Reuters benchmark three-month CD fell to 3.4% from Tuesday's close of 3.65%, and volumes in the secondary CD market fell to 2.15 billion rupees from 4.5 billion rupees on Tuesday.

Indian Stocks Drop for a Second Day; ICICI, HDFC Bank Fall

• The Bombay Stock Exchange’s (BSE) Sensex, fell -1.5% to 11,952.75. The S&P CNX Nifty Index on the NSX slid -1% to 3,625.05. The BSE 200 Index declined -1.5% to 1,401.81. Nifty Index Futures for May delivery fell -0.7% to 3,640.50.
• The BSE’s 18-member banking index has advanced +68% since March 9, when the benchmark index fell to its lowest level this year. In comparison, the Sensitive index has gained 46%.
• Havells India +36% to 222 rupees, HBL Power Systems +19% to 174.20 rupees, Siemens India +2% to 332.65 rupees, Tulip Telecom +25% to 595.50 rupees.

Source: India Economic Scan

7 May 2009 edition | China Economic Scan

7-May-2009

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

In this edition: First GEB (aka "Chinese Nasdaq") listings expected in August, Chinese cargo throughput down 1.9% in April, PetroChina needs $22 billion financing, Institutional investors held 54.6% of market at end of 2008, Chinese stock indexes close up 1-2%.

Top 5 headlines

The Nasdaq Of China Is Coming

• 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.
• CSRC prescribed listing rules for the GEB include; requiring that the issuer breaks even for the 2 most recent consecutive years with combined profits of at least 10 million yuan ($1.5 million). If not, issuers must have profits of at least 5 million yuan ($0.7 million) for the most recent year on revenues of at least 50 million yuan ($7.3 million), plus an annual revenue growth of at least 30% in the recent 2 years.
• Companies are also required to have net assets of at least 20 million yuan ($2.9 million), and ideally operate for more than 3 years.

China's cargo throughput likely to fall 1.9 pct in April

• Cargo throughput at main ports across China was estimated to reach 500 million tonnes in April, down 1.9% from a year earlier - Ministry of Transport (MOT). The breakdown was 340 million tonnes as domestic trade, and 160 million tonnes as foreign trade.
• Daily throughput was expected to be 3.2 percentage points higher when compared with March.
• Estimation showed sea borne container throughput at main ports in China would be 9.2 million containers, presenting a 13.4% drop from a year earlier.

PetroChina Needs as Much as $22 Billion in Financing

• 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.
• Free cash flow fell 76.9 billion yuan in 2008 because of taxes and investments. PetroChine intends to spend 233 billion in 2009 on acquisitions and upgrades.

Institutional investors become major stock market force

• 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, up 5.91 percentage points from a year earlier.
• Stock values held by individual investors accounted for an overwhelming 69.87% at the end of 2005.
• Institutional investors in China's capital markets mainly include mutual funds, social security funds, qualified foreign institutional investors (QFII), corporate annuity funds, brokerage firms, companies and organizations.

Hong Kong Stocks Advance for Fifth Day; HSBC Leads Banks Higher

• Chinese stocks were up on all accounts with the Hang Seng Index up +2.46% to 16,835 Shanghai Composite edging up +0.98% to 2,593 Shenzhen Component closing above 10,000, having risen +2.02% to 10,149.
• HSBC +6.3% to HK$61.60. Hang Seng Bank +10% to HK$98.85. Standard Chartered +7.4% to HK$141 saying it will post pretax profit of $248 million in Q2 from bonds it bought back or exchanged at a discount. Macquarie raised its share-price estimate to HK$147 from HK$97.
• Citic Pacific -2.4% to HK$12.88. The company’s former Chairman Larry Yung is seeking to raise as much as HK$732 million ($94 million) selling 60 million Citic shares at HK$11.95 to HK$12.20. Li & Fung +1.4% to HK$22.35. The company is working on “plenty” of possible deals in the U.S. Company President Bruce Rockowitz said.

Financial Indicators:

Metric	Value	Point change	% change
Hang Seng Index	16,835	404.49	2.46%
Shanghai Composite	2,593	25.18	0.98%
Shenzhen Component	10,149	201.26	2.02%
TAIEX	6,567	186.76	2.93%
CNY/USD	6.8226	-0.0009	-0.01%

Source: China Economic Scan