12 May 2009 Edition | China Economic Scan

12-May-2009

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

In this edition: China's CPI falls again in April, China's PPI also falls, China's food exports returned to growth in March, CITIC Bank set to acquire affiliate for $1.8 bln, Chinese stocks start the week down.

Top 5 headlines

China's CPI falls 1.5% in April

• China's consumer price index (CPI), fell 1.5% year on year in April 2009, according to the National Bureau of Statistics (NBS).
• Food prices (comprising 1/3 of the CPI) dropped 1.3%, dragged down by a 28.6% decline in pork prices as demand plummeted on swine flu fears. Non-food prices fell 1.5%.
• The index was down 0.2% from a month earlier, and the figure for January-April fell 0.8% from the same period last year.

China's producer prices down 6.6 pct in April

• China's producer price index (PPI), a major measure of inflation at the wholesale level, fell 6.6% in April year on year, according to the National Bureau of Statistics (NBS).
• The decline compared with a 6.0% year on year drop in March and 4.6% in Q1 2009.
• Prices of production materials fell 8.1% in April year on year, the NBS said, and PPI for January-April fell 5.1% over the same period last year.

China's food export back to growth in March

• China's food exports reached US$2.62 billion in March 2009, up 8.9% from a year earlier, presenting the first year-on-year growth in the last five months, said General Administration of Customs (GAC).
• Exports of fruit led growth, rising 23.5% in March, and Seafood was up 16.2% year on year.
• Food exports totaled US$7.17 billion Q1, down 5.5% year on year.

CITIC Bank to acquire affiliate for $1.8b

• China CITIC Bank will buy a 70.32% stake in investment holding company CITIC International Financial Holdings for HK$13.6 billion (US$1.75 billion).
• The acquisition will allow CITIC Bank to expand its branch network to other international finance centers and establish a stronger presence in Hong Kong
• CITIC Bank said the unaudited net asset value of CITIC International Financial Holdings was about HK$9.5 billion at the end of 2008. The remaining 29.68% of the company belongs to Spain's second-largest bank BBVA.

China shares fall as investors cash in on gains

• Chinese stocks began the week down with the Hang Seng closing off -1.74% at 17,088, the Shanghai composite down -1.75% to 2,580, and the Shenzhen component falling -3.09% to 9,869.
• Banks led the decline, with Industrial & Commercial Bank of China, China's biggest commercial lender, -1.2% at 4.31 yuan. Bank of China -0.8% to 3.61 yuan while China Construction Bank -1.3% to 4.65 yuan.
• Coal miners also fell. China Shenhua Energy, the country's biggest coal producer, -2.8% to 26.11 yuan and Datong Coal Industry -6.3% to 32.46 yuan.

Financial Indicators:

Metric	Value	Point change	% change
Hang Seng Index	17,088	-301.92	-1.74%
Shanghai Composite	2,580	-45.9	-1.75%
Shenzhen Component	9,869	-314.27	-3.09%
TAIEX	6,648	63.63	0.97%
CNY/USD	6.8280	0.0015	0.02%

Source: China Economic Scan

11-May-2009

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

In this edition: China explains new oil pricing mechanism, Chinese copper recyclers to reopen as copper prices recover, Australia approves Ansteel taking a greater stake in Gindalbie, Hang Seng Index Co announces quarterly review, Chinese banking sector releases social responsibility report.

Top 5 headlines

China explains details of new oil pricing mechanism

• The National Development and Reform Commission (NDRC) said China would adjust domestic fuel prices when crude oil prices exceed a daily fluctuation band of 4% for 22 working days in a row.
• The NDRC said refiners would enjoy "normal" profit when crude oil is below US$80 per barrel, and narrower profit margins when crude oil prices rise above US$80 per barrel.
• Fuel prices would not go further up, or only be raised by a small margin, when crude oil prices exceed US$130 per barrel, and fiscal and tax tools would be used to ensure supplies.

China Metal Recyclers Consider Reopening, Association Says

• Zhai Xin, deputy secretary general at the recycled metal department of the China Nonferrous Metals Industry Association, said metal recyclers who shut down in China last year may start to reopen as copper prices recover from their huge drop-off last year.
• China recycled 600,000 metric tons in metal content of domestically sourced copper scrap in 2008, and imported 5.6 million tons in physical weight last year.
• 40% of world copper demand is met by recycling because it’s cheaper to recycle than to extract and process ore, according to the Bureau of International Recycling.

Ansteel gets nod to up stake in Gindalbie

• Anshan Iron and Steel Group (Ansteel) received approval to increase its stake in Australian iron miner Gindalbie Metals up to a new cap of 36.28%
• Australian Treasurer Wayne Swan said "My approval under the Foreign Acquisitions and Takeovers Act 1975 is conditional upon Ansteel supporting the wider development of infrastructure in the Mid-west (of Australia), and maintaining agreed levels of Australian participation in a green fields joint venture in China's Liaoning province,"
• Ansteel is also a 50% JV partner with Gindalbie to develop the A$1.8 billion Karara Iron Ore Project.

China Resources Power to Replace Yue Yuen on Hang Seng Index

• China Resources Power Holdings, a Chinese electricity producer, will replace Yue Yuen Industrial Holdings in the Hang Seng Index.
• Hang Seng Indexes Co. also said in its quarterly review that HSBC would be capped at a weighting of 15% from the current 20%.
• The changes to the 42 constituent index will occur from 8 June 2009.

China's banking sector issues first social responsibility report

• The China Banking Association (CBA) issued its first banking industry social responsibility report.
• Founded in 2000, CBA is an NGO with 81 full members and 37 associate members.
• The report said the banking sector donated 1.01 billion yuan (US$148.09m) in 2008 on public welfare covering education, culture, sports, health, science and environmental protection.

Source: China Economic Scan

9 May 2009 edition | China Economic Scan

9-May-2009

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

In this edition: China car sales hit record in April, Shenzhen stock exchange releases draft rules for GEM, Citic-prudential to list A-shares in 2012, China Merchants Energy to issue 4 bln yuan bond, Chinese stocks rise again - close the week up strongly.

Top 5 headlines

China car sales at record, but automaker profits weak

• China's passenger car sales in April rose 37.4% from a year earlier to a record high of 831,000 units, the country's official industry association said, bolstered by government stimulus measures.
• "A lot of the volume was coming from compact cars and mini vans as buyers for such models could get tax incentives or subsidies. And small cars mean thin margins," said Chen Qiaoning, an analyst with ABN AMRO TEDA Fund Management.
• "Beijing's stimulus policies are having a longer-lasting effect than expected," said Qin Xuwen, an analyst with Orient Securities. "As long as volume continues to grow, which is quite likely given the records in March and April, and there is no sudden spike in commodity prices, bottom lines of automakers will improve this year."

China Exch Releases Draft Listing Rules For Nasdaq-Style Mkt

• The Shenzhen Stock Exchange issued Friday draft listing rules for the Growth Enterprise Market, taking a major step toward launching the country's first Nasdaq-style stock market.
• SZSE published an 111 page long public consultation document. Highlights of the draft rules include a lower threshold for delisting compared with stocks trading on the main boards of the exchanges in both Shanghai and Shenzhen.
• There has been speculation among analysts and investors that the GEM, a marketplace tasked to nurture cash-hungry innovation-driven startup firms, could be launched as early as June.

CITIC-Prudential Life Insurance mulls A-share listing in 2012

• CITIC-Prudential Life Insurance Co Ltd, a joint venture (JV) equally-owned by state-owed China's CITIC Group and Prudential Plc of Britain, intends to launch an A-share listing in 2012.
• CITIC-Prudential has been posting losses since its establishment in October 2000. As of the end of last year, it might have registered a net loss of about RMB 200 million.
• Citic Prudential earned Q1 premium income of RMB 220 million, achieving 90% of its target for the period. At the beginning of this year, the company set a goal of RMB 1.3 billion, 30% more than RMB 1 billion it realized in 2008.

China Merchants Energy to issue 4 bln yuan bond

• The parent of China Merchants Energy Shipping Co said on Friday it will issue 4 billion yuan ($586.5 million) of 10-year corporate bonds from May 8 to 14.
• The bonds will pay a coupon of 4.35%, which was derived from a spread over the one-year Shanghai Interbank Offered Rate (SHIBOR), and are rated AAA by China Chengxin Ratings Agency.
• Proceeds will be used for container terminal construction projects in Shenzhen, Ningbo and Qingdao.

China’s Stocks Rise for Seventh Day; China Cosco Advances

• Chinese stocks rose again, finishing the week up. The Hang Seng closed Friday up 1% at 17,390, the Shanghai Composite up 1.09% to 2,626, and Shenzhen Component up 0.73% to 10,183.
• China Cosco +3.9% to 13.32 yuan. China Shipping +1.1% to 14.11 yuan. The Baltic Dry Index +6.3% to 2,194 points yesterday, according to the Baltic Exchange. “Shipping rates are likely to continue to rebound as lots of infrastructure projects will start now and increase the demand for commodities,” said Zhang Xiuqi, a strategist at Guotai Junan Securities.
• Vanke +7.9% to 9.84 yuan. Shenzhen Airport +5.8% to 7.09 yuan. COFCO Property, the property unit of the country’s biggest grain trader, +10% to 7.68 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,390	171.98	1.00%
Shanghai Composite	2,626	28.2	1.09%
Shenzhen Component	10,183	74.12	0.73%
TAIEX	6,584	11.00	0.17%
CNY/USD	6.8265	0.0002	0.00%

Source: China Economic Scan

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