18 May 2009 | China Economic Scan

18-May-2009

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

In this edition: Hong Kong GDP falls 7.8% in Q1, China said to have IPO backlog of up to 400 companies, China reduces industrial land prices, American Dairy gains market share in China, trading of Chinese stock index futures may come soon.

Top 5 headlines

HK's first quarter GDP down 7.8%

• Hong Kong's GDP for the first quarter of this year fell 7.8% after a 2.6% drop in last year's fourth quarter.
• GDP for 2009 as a whole is now forecast to contract by 5.5 to 6.5% in real terms, down from the forecast decline of 2 to 3% earlier put out in the government budget.
• Positive signs are an expected pick-up in the mainland economy and global stock markets, on the downside is a sharp plunge in global demand and a fall-off in intra-regional exports.

China Has IPO Backlog Up to 400 Companies, Citic Says

• China has 300 to 400 companies waiting to hold initial public offerings (IPO), said Citic Securities Co. Chairman Wang Dongming.
• The nation’s securities regulator plans to set up a new system for pricing IPOs and may “soon” end a moratorium on IPOs, said Fan Fuchun, vice chairman of the China Securities Regulatory Commission.
• “The decision on who to list, how to price the listing should be given to the investment bank, company and investors,” said Wang.

China to lower industrial land prices to boost investment

• China's Ministry of Land and Resources has announced a 30% cut in the minimum purchase price of land for industrial use in order to boost investment.
• The national average industrial land price was 721 yuan per square meter in the first quarter, down 1.08% from the fourth quarter of last year, and down 1.1% year on year, according to the ministry.
• Land prices ranged from 60 yuan ($8.77) per square meter in some counties in northwestern Xinjiang Uygur autonomous region to 840 yuan per square meter in the suburbs of Shanghai.

American Dairy Soars as Sales Triple on Milk Scare

• American Dairy reported Q1 sales of $113.8 million vs $39.1 million last year, gross margins jumped to 64% from 37% in the year-earlier period, on increased sales of infant formula. Milk powder sales rose more than threefold in the quarter.
• Chinese based American Dairy jumped 55% in New York trading on Friday.
• “Our first quarter 2009 sales reflect consumers’ flight to quality at the height of the melamine crisis in China,” said Leng You-Bin, chief executive officer of American Dairy.

Index Futures Come Nearer

• The China Financial Futures Exchange (CFFEX) is likely to receive approval to launch trading in a Shanghai Shenzhen 300 Index future soon, having conducted mock trading for a little under 3 years.
• Trading in the Chinese stock index futures will be limited to investors who have a balance in their margin account of at least 500,000 yuan ($73,313.78); pass a CFFEX test; and have practical experience in the mock trading of stock index futures.
• The Shanghai Shenzhen 300 Index is made up of 179 shares in Shanghai and 121 in Shenzhen. The stocks in the index cover about 60% of the market value in Shanghai and Shenzhen.

Source: China Economic Scan

China Economic Scan Weekly Debt Market Review – 16 May 2009

China Economic Scan Weekly Debt Market Review – 16 May 2009

16/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

The CSI Enterprise Bond Index started the week at 117.39, and dropped sharply for a brief moment late Monday to 116.75 before climbing to the week’s close of 117.74. The Shenzhen Corporate Bond Index started the week at 130.45, and reached a high of 130.64 before closing the week at 130.62.

Jiang Jiemin, Chairman of PetroChina Company Limited, said Tuesday that PetroChina plans to raise 100 billion yuan ($14.71 billion) through debt financing in 2009 to support major strategic projects including oil exploration and development, oil refining and overseas business.

Beijing-based CNPC sold $1 billion of three-year floating- rate notes on May 12. The notes, part of a $3 billion borrowing plan to fund overseas projects, were priced to pay 62 basis points more than the London interbank offered rate.

China's Ministry of Finance (MOF) said last Friday it would issue 91-day treasury bonds with a face value of 15 billion yuan ($2.2 billion) from May 11 to 13. The issue price, set by competitive bidding, was 99.793 yuan. The annual yield was 0.85%, and interest would be calculated from May 11 and paid in a lump sum at maturity.

Lending in China was up 26% year on year 591.8 billion yuan ($86.7 billion), the central bank said on its Web site, about a third of the record 1.89 trillion yuan in March. M2, the broadest measure of money supply, rose 26% from a year earlier.

Bank of China (BOC) 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 3 years. BOC will grant a credit line of $1.75 billion in the coming 2 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.

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

Source: China Economic Scan

China Economic Scan Weekly Stockmarket Review – 16 May 2009

China Economic Scan Weekly Stockmarket Review – 16 May 2009

16/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

Chinese stocks finished the week mixed versus last Friday’s close. Mainland stocks rose slightly with the Shanghai Composite up 0.75% at 2,645.26 and the Shenzhen Component up 0.89% at 10,273.23, while the Hang Seng closed down –3.45% week on week to 16,790.70, and the TAIEX down -1.44% to 6,489.09.

During the week there were a range of interesting developments, Hong Kong Exchanges & Clearing said net income dropped 49% to HK$834.2 million ($108 million) in the 3 months ended March 31, after the global recession caused trading to decline. The average daily value of securities traded on the exchange slumped 55% to HK$44.7 billion from a year earlier.

Keeping with the Hong Kong exchange, China Resources Power Holdings, a Chinese electricity producer, was named to 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 be enacted from 8 June 2009.

In resources, 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.

China CITIC Bank said it would 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 let CITIC Bank 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.

Also CITIC-Prudential Life Insurance, a joint venture (JV) equally owned by China's state-owed CITIC Group and Prudential Plc of Britain, said it 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 2008, it registered a net loss of about RMB 200 million.

On the international front, China and Britain agreed on Monday to prioritize opening China's stock markets to foreign companies and to arrange for more Chinese firms to list on London exchanges, in negotiations said to be largely driven by HSBC. As yet no timetable has been set, however there was talk of aiming to get Chinese companies listed in London as early as in the next few months.

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% 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.

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%. Ansteel is also a 50% JV partner with Gindalbie to develop the A$1.8 billion Karara Iron Ore Project.

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

Source: China Economic Scan

16 May 2009 Edition | China Economic Scan

16-May-2009

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

In this edition: China's fiscal revenues fell sharply in April, China looks to fine tune monetary and fiscal policy to stimulate growth, PBOC gov says high saving rate to build shanghai financial hub, FDI in China drops 22.5%, Chinese stocks close up on Friday.

Top 5 headlines

China's fiscal revenues fall sharply in April

• Combined central and local government revenues fell 13.6% from a year earlier, a far sharper decline than the 0.3% drop in March and the 1.2% drop in February.
• Government spending in April surged 24.5 percent from a year earlier as Beijing implemented its 4 trillion yuan ($585 billion) stimulus package to prop up domestic demand as the economy slows.
• Government outlays in the first four months totalled 2.05 trillion yuan, while spending was 1.79 trillion yuan. That left China with a fiscal surplus of 265 billion yuan through April, but the bulk of spending tends to come in the later months of the year, putting the country on track for an overall deficit.

China May ‘Fine-Tune’ Monetary, Fiscal Policies to Spur Growth

• China may “fine-tune” monetary and fiscal policies as it seeks to spark a revival in the world’s third-biggest economy, central bank Governor Zhou Xiaochuan said.
• “Economic conditions are still shaky, especially trade, so we don’t expect a marked change in policy,” said Ken Peng, an economist with Citigroup “Concerns over the quality of lending have definitely increased; some new controls could be imposed as early as the third quarter.”
• New lending grew more slowly in April after a record 1.89 trillion yuan ($277 billion) of loans in March.

PBOC Gov: China High Saving Rate To Help Build Shanghai As Hub

• "China is a country with a high saving ratio, offering abundant financing sources," Zhou said. "Although the central government encourages domestic consumption, China's saving ratio will remain high because the country is populous and has a cultural preference for saving."
• China's saving rate rose to 49.9% in 2007 from 37.5% in 1998, according to the latest figures from the PBOC. The U.S.'s savings rate in March was 4.2%, according to U.S. Commerce Department data.
• However, Chinese investors tend to have low risk tolerance compared with their counterparts in developed financial markets, which is an obstacle to financial innovation, he said.

Foreign Direct Investment in China Tumbles on Crisis

• Investment dropped 22.5 percent to $5.89 billion in April, the commerce ministry said at a briefing in Beijing today.
• That compares with a 9.5 percent decline in March. For the first four months of this year, spending fell 21 percent to $27.67 billion.
• Businesses that are partly or entirely foreign owned account for 30% of industrial output, 55% of trade and 11% of urban jobs, according to the commerce ministry.

Chinese shares down 0.9% on fall of surrounding markets

• Chinese stocks closed up on Friday, the TAIEX rose the most, up +1.96% to 6,489, the Hang Seng rose +1.51% to 16,791, the Shanghai Composite up +0.20% to 2,645, and the Shenzhen Component +0.21% at 10,273.
• Anhui Conch Cement, China’s biggest cement maker, gained +5.5% to 45.03 yuan, the biggest advance in two weeks. Its Hong Kong-traded stock was raised to “overweight” from “underweight” at JPMorgan Chase & Co., which said Chinese demand will grow by 10% this year.
• Huaneng Power lost -1.4% to 7.71 yuan. Huadian Power International, a unit of China’s fourth-largest electricity producer, declined -1.6% to 5 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	16,791	249.01	1.51%
Shanghai Composite	2,645	5.37	0.20%
Shenzhen Component	10,273	21.08	0.21%
TAIEX	6,489	124.92	1.96%
CNY/USD	6.8275	-0.002	-0.03%

Source: China Economic Scan

China Economic Scan Weekly Economic Review - 15 May 2009

China Economic Scan Weekly Economic Review - 15 May 2009

15/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

In the past week a number of key indicators of economic activity came out, painting a positive picture for economic growth in China, but CPI and PPI stats showed prices continued to fall. Among those data released were output, retail sales, food exports, and urban fixed-asset investment.

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 a 3^rd of CPI) dropped 1.3%, dragged down by a 28.6% decline in pork prices as demand plummeted on pig flu fears. Non-food prices fell 1.5%. The index was down 0.2% since March, and the YTD fell 0.8% from the same period last year.

China's producer price index (PPI), a major measure of inflation at the wholesale level, also fell 6.6% in April year on year, according to the 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.

Meanwhile, China’s output rose 7.3% from a year earlier, according to the NBS, after gaining 8.3% in March, and less than analyst estimates of 8.6%. In another positive sign, 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.

On a similar note, Morgan Stanley raised its forecast for China economic growth to 7-8% from 5% for 2009. Morgan Stanley Asia Chairman Stephen Roach said growth could fall back to 5.5 to 7% in 2010, as external demand will remain weak. "It's premature to say China is enjoying a V-shaped recovery. I think the outcome is going to be closer to the letter W." he said.

New orders placed with China’s shipyards fell 95% during the first four months of this year, the Ministry of Industry and Information Technology said. Orders from January to April dropped to 990,000 deadweight tons. While new orders last month reached 200,000 deadweight tons, taking total order books to 195 million deadweight tons at the end of April - 7% higher than a year earlier.

Another key indicator, 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.

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.

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

15 May 2009 Edition | China Economic Scan

15-May-2009

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

In this edition: Morgan Stanley raises 2009 China GDP forecast, China shipbuilder orders fell 95% YTD, Hong Kong Exchange reported earnings down 49%, HK & China Gas to invest 5bln yuan in China, Chinese shares close down on Thursday.

Top 5 headlines

Morgan Stanley raises 2009 China GDP forecast

• Morgan Stanley raised its forecast for China economic growth to 7-8% from 5% for 2009
• Morgan Stanley Asia Chairman Stephen Roach said growth may fall back to 5.5 to 7% in 2010 as external demand will remain weak.
• "It's premature to say China is enjoying a V-shaped recovery. I think the outcome is going to be closer to the letter W."

China Shipbuilder Orders Fell 95% in First 4 Months

• New orders placed with China’s shipyards fell 95 percent during the first four months of this year, the Ministry of Industry and Information Technology said.
• Orders from January to April dropped to 990,000 deadweight tons, the ministry said on its Web site.
• New orders last month reached 200,000 deadweight tons, taking total order books to 195 million deadweight tons at the end of April, 7% higher than a year earlier, it said.

Hong Kong Exchange Declines to Say Profits Bottomed

• Hong Kong Exchanges & Clearing said net income dropped 49% to HK$834.2 million ($108 million) in the 3 months ended March 31, after the global recession caused trading to decline.
• The average daily value of securities traded on the exchange slumped 55 percent to HK$44.7 billion from a year earlier.
• The value of securities traded has climbed to a daily average of HK$70.5 billion this quarter and yesterday increased to HK$146.6 billion, the highest since Jan. 23, 2008.

HK & China Gas to invest up to 5 bln yuan in China

• Gas distributor Hong Kong and China Gas Co Ltd said on Thursday it plans to invest 4 billion yuan ($586.3 million) to 5 billion yuan in China this year.
• Its capital expenditure in China amounted to about HK$3 billion last year ($385 million).
• The increased investment this year will be focused on new energy projects such as coal and chemicals in Inner Mongolia, managing director Chan Wing-kin said.

Chinese shares down 0.9% on fall of surrounding markets

• Chinese stocks closed down on Thursday; the Hang Seng was down -3.04% to 16,542, Shanghai Composite -0.90% to 2,640, Shenzhen Component -0.41% to 10,252, TAIEX -1.87% to 6364.
• Weak blue chips pulled down the market. PetroChina declined 1.35% to 13.11 yuan (1.93 U.S. dollars), and Sinopec lost 2.21% to 10.6 yuan.
• Financial shares led the fall. China Merchants Bank slid 2.93% to 17.23 yuan, and China Ping An declined 2.75% to 40.37 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	16,542	-517.93	-3.04%
Shanghai Composite	2,640	-23.88	-0.90%
Shenzhen Component	10,252	-42.22	-0.41%
TAIEX	6,364	-120.97	-1.87%
CNY/USD	6.8295	0.0025	0.04%

Source: China Economic Scan

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