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

13 May 2009 Edition | China Economic Scan

13-May-2009

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

In this edition: Chinese fixed asset investment climbs 30.5%, ports refocus on domestic cargo to drive earnings, Bank of China to lend 20 bln yuan to COSCO, Jien Nickel buys 19.95% of Aus based Metallica Minerals, Chinese stocks rebound on investment figures.

Top 5 headlines

Chinese Investment Climbs 30.5% on Stimulus Plan, Surging Loans

• China’s urban fixed-asset investment climbed 30.5% in the first four months from a year earlier compared with a 28.6% increase in the first three months and analyst estimates of 29.1%.
• “Fixed-asset investment is the most important driver for economic growth this year,” said Sun Mingchun, chief China economist at Nomura Holdings.
• Lowering the capital ratio by an average of 6 percentage points could save local governments and private investors more than 1 trillion yuan a year, noted Lu Zhengwei, Shanghai-based chief economist at Industrial Bank Co.

Ports pin hopes on rising domestic trade

• "This year is the most difficult one for us and we have been continuously taking measures to stimulate cargo throughput for domestic market," Sun Junmin, public relations director, Shenzhen Yantian Port
• Chinese foreign trade has been dwindling since last November and in April, exports and imports dropped 22.6 and 23% year-on-year respectively.
• In April, the cargo and container throughput handled by Tianjin port surged 2.02 and 5.3% respectively year-on-year, largely due to the growth in domestic business, which respectively grew by 14.4, and 42.1% from a year earlier.

BOC grants 20b yuan in loans to shipping firm

• Bank of China (BOC) Shanghai branch recently approved syndicated loans worth nearly 20 billion yuan ($2.93 billion), which will be provided to COSCO Container Lines Co Ltd (COSCON) in the next three years.
• BOC Shanghai branch will grant a credit line of $1.75 billion in the coming two years for the construction and operation of 28 COSCON container vessels.
• It will offer $1 billion in liquidity loans in the next 3 years to help cover COSCON's operating costs.

Jien Nickel buys 19.95% of Australia's Metallica Minerals

• Jien Nickel, one of China's leading nickel producers, said in a filing to the Shanghai Stock Exchange that it is now the largest shareholder of Australia's Metallica Minerals, after buying 19.95 percent of the company with A$5.16 million ($3.93 million).
• The company bought 22.85 million shares of the Metallica Minerals at a price of A$0.2259 per share.
• Earlier in April, Jien Nickel announced raising 1.1 billion yuan ($161 million) from the market, with 600 million to be invested in mines in Canada and Papua New Guinea.

China shares rebound on stronger investment data

• Chinese stocks rebounded on Tuesday with positive econ news boosting the market; Hang Seng +0.38% to 17,154, Shanghai Composite +1.49% to 2,618, Shenzhen Component +3.14% to 10,179.
• China Vanke, the country's biggest developer, and SZSE's largest company, up +6.7% to 10.46 yuan, while rival Poly Real Estate Group rose +6.1% to 22.19 yuan.
• Steel producers were buoyed by rising steel prices. Baoshan Iron & Steel jumped +6.3% to 6.55 yuan while Xinjiang Bayi Iron & Steel advanced +6% to 9.6 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,154	65.69	0.38%
Shanghai Composite	2,618	38.42	1.49%
Shenzhen Component	10,179	310.36	3.14%
TAIEX	6,433	-214.95	-3.23%
CNY/USD	6.8260	-0.002	-0.03%

Source: China Economic Scan

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