26 May 2009 | China Economic Scan

26-May-2009

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

In this edition: Chinese rating agency launches sovereign ratings, Dalian futures exchange lists PVC futures contract, Tingyi sees 43% profit rise on noodle and drink sales, Citic Pacific to invest $2.2bln in Steel, Chinese stocks begin the week with a small increase.

Top 5 headlines

China unveils 1st sovereign credit rating standards

• Chinese credit rating agency, Dagong Global Credit Rating, one of the first domestic rating agencies in China, announced the launch of its sovereign credit rating standards.
• Elements of credit risks will include the country's political environment, economic power, fiscal status, foreign debt and liquidity, said the company, adding that it judges the credit of a sovereign entity on the basis of a comprehensive evaluation of its fiscal strength and foreign reserves.
• Compared with other rating agencies, Dagong pays more attention to the different economic stage of each country, and examines the features of its credit risks in a holistic and systematic view, according to Dagong.

China launches PVC futures trading

• China started the trading of polyvinyl chloride (PVC) futures contracts at 9 a.m. at DALIAN Commodity Exchange Monday, the 3rd new futures contract this year after steel and rice.
• The September contract V909 opened 275 yuan higher at 6575 yuan per ton.
• PVC is a kind of synthetic resin widely used in construction, plumbing, electric wires and packaging. China is the world's largest PVC manufacturer, with an annual output of 8.82 million tonnes last year.

Tingyi Posts Record Profit on Noodle, Drinks Sales in China

• Tingyi (Cayman Islands) Holding Corp., China’s biggest maker of packaged food, said profit climbed 43% to a quarterly record on higher instant-noodle and beverage consumption in the world’s third-largest economy.
• Q1 net income rose to $93 million, from $65 million a year earlier. Sales increased 21% to $1.18 billion.
• Instant noodle sales gained 12% to $587.7 million in and beverage sales rose 37% to $525 million, Tingyi said. Finance costs fell to $6.63 million from $9.25 million and the prices of palm oil, sugar and plastics declined, it said.

Citic Pacific to Invest $2.2 Billion in Steel, May Sell Assets

• Citic Pacific, rescued by China after posting the biggest currency derivative loss by a Chinese company, plans to invest 15 billion yuan ($2.2 billion) in its iron ore and steel businesses, and may sell other assets.
• The company in March posted its first annual loss of HK$12.7 billion ($1.6 billion) in almost 2 decades. It bought currency contracts to fund the iron ore mine in Australia, and bets that the Australian dollar would gain incurred losses after the currency tumbled.
• Citic Pacific dropped -0.4% to close at HK$16 in Hong Kong trading. The shares have climbed 69% since the appointment of new Chairman, Chang Zhenming on April 8.

China’s Stocks Rise on Economic Recovery Hope; Haitong Gains

• Chinese stocks rose slightly on Monday, the Hang Seng up +0.35% to 17,122, the Shanghai Composite up +0.48% to 2,610, and the Shenzhen Component up +1.09% to 10,182.
• Haitong Securities, the second-largest listed brokerage by market value, rose +6.3% to 14.33 yuan. Pacific Securities added +8.4% to 16.90 yuan and Sinolink Securities gained +4% to 37.53 yuan.
• China may resume these share sales on the nation’s stock exchanges next month, the Shanghai Securities News reported today. 32 companies are waiting to sell a combined 14.3 billion shares in initial offerings, it said.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,122	59.3	0.35%
Shanghai Composite	2,610	12.41	0.48%
Shenzhen Component	10,182	109.53	1.09%
TAIEX	6,734	-2.83	-0.04%
CNY/USD	6.8239	-0.0038	-0.06%

Source: China Economic Scan

25 May 2009 | China Economic Scan

25-May-2009

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

In this edition: ARC Investment says China's export model is broken, HK regulator says PCCW ruling to stop vote manipulation, Intel Chinese investee eyes Shenzhen GEB listing, China to issue 16.9 bln yuan local bonds and 30 bln yuan t-bonds, CSRC says IPOs to resume after June 5.

Top 5 headlines

China Export Model Is ‘Completely Broken,’ ARC Investment Says

• China’s export model is “completely broken” and investors should shift out of companies that rely on overseas sales and into those that sell goods domestically, according to private equity firm ARC Investment Partners.
• “The export economy model is completely broken,” Adam Roseman, the Shanghai-based chief executive officer at ARC Investment, and “They are working as fast as they can to develop their domestic economy.”
• ARC Investment has invested in 12 Chinese companies focused on the consumer and renewable energy, replacing management in return for taking “large positions” in these companies.

PCCW Ruling to Stop Vote Manipulation, Regulator Says

• The Court of Appeal last month ruled that a PCCW shareholder ballot that approved the HK$15.93 billion ($2.1 billion) buyout was manipulated, upholding a legal challenge from the commission.
• The decision that blocked PCCW Ltd. Chairman Richard Li’s buyout offer for the phone company will stop vote manipulation in privatizations, the city’s markets regulator said.
• The verdict won’t deter “legitimate privatizations,” said Martin Wheatley, chief executive officer of the Securities and Futures Commission.

Intel Chinese Member Eyes Shenzhen Growth Enterprise Board

• Enjoyor Technology Group is preparing for listing on the to-be-established Growth Enterprise Board (GEB) of the Shenzhen Stock Exchange (SSE), said an executive of the Chinese intelligentization solution provider.
• In February 2009, Intel Capital, the investment arm of Intel Corporation (NASDAQ: INTC), announced that it injected a certain amount of money into the Chinese company.
• The company was built in Hangzhou Hi-tech Industry Development Zone (HHTZ), Zhejiang Province in 1992, mainly engaged in building of intelligent traffic, medical, educational, security, financial and office systems.

China to issue 16.9 bln yuan local bonds, 30 bln yuan T-bonds next week

• China's Ministry of Finance (MOF) said Friday it would issue 16.9 billion yuan (US$2.48 billion) of 3-year local government bonds next week on behalf of 4 provinces and municipalities at a fixed annual coupon rate of 1.67%.
• The amounts were 3.5 billion yuan for Guangxi Zhuang Autonomous Region, 5.6 billion yuan for Beijing city, 4 billion yuan for Shanghai city and 3.8 billion yuan for Henan Province.
• The MOF also said it would issue 2 batches of book-entry treasury bonds with a face value of 15 billion yuan (US$2.2 billion) each starting next week.

Regulator: China to resume IPOs after June 5

• The China Securities Regulatory Commission (CSRC) said it would end a de facto suspension of initial public offerings (IPOs) on the Shanghai and Shenzhen stock exchanges as of June 5.
• The CSRC effectively suspended all new stock issues last September, as it halted approvals.
• Under the new rules, stock subscribers need to use either the online or off-line subscription system, but not both, to purchase new stocks. Institutional investors used to enjoy the privilege of subscribing through both systems, while retail investors could use only the off-line system. The new guidelines aim to improve the price discovery function of the stock market, and help retail investors subscribe to newly issued stocks, said the CSRC.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,063
Shanghai Composite	2,598
Shenzhen Component	10,073
TAIEX	6,737
CNY/USD	6.8277

Source: China Economic Scan

China Economic Scan Weekly Stockmarket Review – 23 May 2009

China Economic Scan Weekly Stockmarket Review – 23 May 2009

23/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

Mainland stocks closed the week down with the Shenzhen Component down -1.95% week on week to 10,073, and Shanghai Composite down -1.78% to 2,598. Hong Kong stocks however closed up +1.62% with the Hang Seng at 17,063 and in Taiwan the TAIEX jumped +3.82% to 6,737.

During the week Citic Securities Chairman Wang Dongming said China has 300 to 400 companies waiting to do initial public offerings (IPO). China’s securities regulator plans to set up a new system for pricing IPOs and may “soon” end a moratorium on IPOs. Wang also said “The decision on who to list, how to price the listing should be given to the investment bank, company and investors,”

American Dairy reported Q1 sales of $113.8 million vs $39.1 million last year, on increased sales of infant formula. Milk powder sales rose more than threefold in the quarter. “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.

Esprit, which makes 85% of sales in Europe, said that sales in the 9 months through March fell 2% to HK$27.2 billion ($3.5 billion) as the local currency gained against the euro. Esprit’s wholesale revenue, including earnings from department-store counters, fell 8% to HK$14.8 billion, even as retail sales rose 5.9% to HK$12.2 billion.

PetroChina said it will buy 8 gas suppliers from its parent company and issue 26 billion yuan in medium-term notes. Goldman Sachs Group raised its stock rating to “neutral.”

A Chinese Fund manager, Zhang Ling, at ICBC Credit Suisse Asset Management which oversees the equivalent of $7.21 billion, said “Stocks are expensive now and have reached a level investors deem too high to be pushed up further,” and that “Corporate earnings have yet to catch up.”

Finally, in an exciting development, the China Financial Futures Exchange (CFFEX) is said to be 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.

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 Debt Market Review – 23 May 2009

China Economic Scan Weekly Debt Market Review – 23 May 2009

23/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

The CSI Enterprise Bond Index started the week at 117.81 and climbed steadily to a high of 118.08, before closing the week at 118.04. The Shenzhen Corporate Bond Index started the week at 130.59, climbed to a high of 130.78, and closed the week at 130.77

Agricultural Bank of China (ABC) raised 50 billion yuan ($7.3 billion) in the nation’s biggest corporate bond sale to boost capital as part of preparing for an initial public offering (IPO). ABC sold 25 billion yuan of 10-year callable bonds at a coupon rate of 3.3% for the first 5 years and 25 billion yuan of 15-year bonds at 4% for the first 10 years on interbank market.

Shenzhen Development Bank is planning to issue up to RMB 1.5 billion in 15-year bonds on May 26, sources reported. Dagong Global Credit Rating Co has rated the bonds AA-, and Haitong Securities and UBS Securities have been assigned as major underwriters for the issuance.

China's Ministry of Finance (MOF) said it would issue 27.3 billion yuan ($4 billion) of three-year book-entry treasury bonds, the ninth batch of its type this year. The bonds have a fixed annual interest rate of 1.55% and will be sold from May 21 to 25.

The MOF issued a total of 28.5 billion yuan of local government bonds in the first half of May on behalf of 6 local governments, which would include Dalian city, Sichuan province and Hubei province.

Finally, Chinese oil giant, PetroChina said it will buy 8 gas suppliers from its parent company, CNPC, and issue 26 billion yuan in medium-term notes.

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

23 May 2009 China Economic Scan

23-May-2009

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

In this edition: China provides further details on stimulus spending, China considers setting iron ore price index, Zhongjin to boost gold production assets, Lenovo shares fall on record loss, Chinese stocks fall again - closing the week down.

Top 5 headlines

China updates spending details of stimulus fund

• China's economic planning body released a breakdown Thursday of how the government's 4 trillion yuan (US$586 billion) of stimulus funding was being spent.
• According to the commission, 214,000 units of low-income housing were completed, with construction started on another 650,000 units.
• Since the stimulus package was unveiled in November, 230 billion yuan had been used as of the end of April, the National Development and Reform Commission (NDRC) said.

China considers setting iron ore price index

• China will unveil its first iron ore trade platform Rizhao International Iron Ore Trade Center on May 25 in Shandong Province, which signals that the establishment of the country's iron ore price index is under way.
• Jointly invested in by 5 local private companies pursuing bulk commodity transaction in Shandong, the center mainly provides electronic commerce services for iron ore suppliers and steel makers.
• Data from China Customs showed the country imported 443.7 million tonnes of iron ore in 2008, and imports in January-April period in 2009 hit 188 million tonnes.

Zhongjin to get gold assets from parent

• Zhongjin Gold Co is making a bid to become the leading producer of the yellow metal in China.
• The Shanghai-listed company, controlled by the State-owned China National Gold Group Corp (CNGGC), plans to acquire seven gold mines in Henan, Hebei, Jilin provinces and Xinjiang Uygur autonomous region from its parent company in a transaction described by Zhongjin as an "asset injection".
• The acquisition, if it goes through, will boost Zhongjin's total gold reserves to 405.98 tons and annual production to 12.5 tons.

Lenovo Shares Fall on Record Loss, PC Market Outlook

• Lenovo's sales in Q1 2009 fell 26% to $2.77 billion, the company reported yesterday after the Hong Kong market closed.
• “There won’t be much of a rebound in business in the U.S. and Europe,” said Kevin Tam, who rates Lenovo shares “hold” at Everbright Securities in Hong Kong. “Profitability should improve as costs come down after the job cuts, and the company should gain sales in China and emerging markets.”
• The computer maker dropped -5.4% to HK$2.83 as of 10:55 a.m. on Hong Kong’s stock exchange.

China’s Stocks Decline, Complete First Weekly Drop in a Month

• Chinese stocks fell again on Friday with the Hang Seng down -0.80% to 17,063, the Shanghai Composite down -0.50% to 2,598, and the Shenzhen Component down -0.36%.
• “The economic recovery will take longer than earlier expected due to weak external demand,” said Yan Ji, who helps oversee $850 million of investments at HSBC Jintrust Fund Management Co. in Shanghai. “Investors shouldn’t expect stocks to rise as quickly as they have done this year.”
• Shenhua dropped -2.1% to 26.09 yuan. China Coal Energy, the No. 2, fell -3.2% to 11.68 yuan, paring its 2009 gain to 81%. Crude oil for July delivery yesterday dropped -1.6% to settle at $61.05 a barrel. An index of energy stocks has rallied 74% this year, the best performer out of 10 industry indexes on the CSI 300 Index. The gauge of materials shares ranks third, having climbed 62%.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,063	-136.97	-0.80%
Shanghai Composite	2,598	-13.02	-0.50%
Shenzhen Component	10,073	-36.23	-0.36%
TAIEX	6,737	18.48	0.28%
CNY/USD	6.8277	-0.0018	-0.03%

Source: China Economic Scan

China Economic Scan Weekly Economic Review - 22 May 2009

China Economic Scan Weekly Economic Review - 22 May 2009

22/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

During the past week a number of commentators highlighted issues in the Chinese economy, including interest rate movements and foreign trade. There were also some data releases such as SOE revenue, foreign financial asset holdings, and Hong Kong GDP figures.

Former Chinese ambassador to Brazil, Chen Duqing, said that the two countries have huge potential to expand trade. Bilateral trade rose 63.2% year on year to $48.98 billion in 2008, according to data released by the General Administration of Customs.

Brazil imported $268 million worth of farm produce from China, up 125.2% year on year. China imported vegetable oil, cotton and fruit worth $8.79 billion from Brazil last year, an increase of 82.4% from a year ago.

China's foreign financial assets rose 23% in 2008 to reach a total of $2.92 trillion, the State Administration of Foreign Exchange (SAFE) said. Of that amount, nearly $2 trillion, or 67%, were foreign exchange and gold reserves. Outbound direct investment, however, was just $169.4 billion, accounting for 6% of the total foreign financial assets.

London based economist Mark Williams said the deflation in China means that “real rates have risen sharply,” and that “If the recovery disappoints, further interest-rate cuts could resume from the middle of the year.” The key one-year lending rate is 5.31% after 5 cuts in the final 4 months of last year. Williams predicts 81 basis points of cuts in lending and deposit rates by the end of 2009 on the back of falling CPI.

Operating revenues of China's state-owned enterprises (SOEs) fell 7.3% year on year to 5.97 trillion yuan (854 billion U.S. dollars) in the first 4 months of 2009, the Ministry of Finance said. Profits of the 115,000 SOEs totaled 323.64 billion yuan in the first 4 months, down 32.3% from a year earlier. The fall was 4.5 percentage points lower than that of the 1st quarter.

China's Ministry of Land and Resources announced a 30% cut in the minimum purchase price of industrial land to boost investment. The national average industrial land price was 721 yuan per square meter in Q1 2009, down 1.08% from Q4 2008, and down 1.1% year on year. Land prices in China ranged from 60 yuan ($8.77) per square meter in northwestern Xinjiang Uygur, to 840 yuan per square meter in Shanghai.

Hong Kong's GDP for Q1 2009 fell 7.8% after a 2.6% drop Q4 2008. 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. However there are positive signs e.g. a pick-up in the mainland economy and global stock markets. While on the downside is a sharp plunge in global demand and a fall-off in intra-regional exports.

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: http://www.chinaeconomicscan.com/weekreview22may09econ.html

22 May 2009 | China Economic Scan

22-May-2009

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

In this edition: Capital Economics says China may cut interest rates, Chinese domestic demand shows signs of picking up, Revenues of Chinese SOEs 7.3% YTD, China to issue $4bln treasury bonds, Chinese stocks close down 1.5% on Thursday.

Top 5 headlines

China May Cut Rates as Recovery Falters, Capital Economics Says

• Deflation means “real rates have risen sharply,” London based economist Mark Williams said. “If the recovery disappoints, further interest-rate cuts could resume from the middle of the year.”
• The key one-year lending rate is 5.31% after five cuts in the final 4 months of last year.
• Williams predicts 81 basis points of cuts in both lending and deposit rates by year’s end after consumer prices fell for 3 straight months and producer prices declined by a record in April.

China sees initial results in boosting domestic demand

• China's retail sales rose 14.8% in April year on year, 0.1 percentage points higher than March.
• Rural spending, driven by a government rebate policy on home-appliance purchases and other commodities, grew by 16.7% in April, which was 2.8 percentage points higher than urban growth, according to NBS.
• China became the world's largest vehicle market again with more than 1.15 million cars sold in April, up 25% from a year earlier. Property sales rose by 17.5% in acreage from a year earlier in the first 4 months of 2009.

Operating revenues of China's state-owned enterprise down

• Operating revenues of China's state-owned enterprises (SOEs) fell 7.3% year on year to 5.97 trillion yuan (854 billion U.S. dollars) in the first 4 months, the Ministry of Finance said.
• Profits of the 115,000 SOEs totaled 323.64 billion yuan in the first 4 months, down 32.3% from a year earlier. The fall was 4.5 percentage points lower than that of the 1st quarter.
• The combined profits of China's SOEs, excluding financial institutions, totaled 217.7 billion yuan in the first quarter, accounting for 3.31% of the country's gross domestic product.

China to issue $4b treasury bonds

• China's Ministry of Finance (MOF) said Wednesday it would issue 27.3 billion yuan ($4 billion) of three-year book-entry treasury bonds, the ninth batch of its type this year.
• The bonds have a fixed annual interest rate of 1.55% and will be sold from May 21 to 25.
• The MOF would issue a total of 28.5 billion yuan of local government bonds in the first half of May on behalf of 6 local governments, which would include Dalian city, Sichuan province and Hubei province.

China Stocks Fall for Second Day on Economy Concern; SAIC Drops

• Chinese stocks dropped off again on Thursday with the Shenzhen Component recording a fall of -3.30% to 10,109, Hang Seng -1.58% to 17,199, and Shanghai Composite down -1.54% to 2,611.
• “Stocks are expensive now and have reached a level investors deem too high to be pushed up further,” said Zhang Ling, a fund manager at ICBC Credit Suisse Asset Management Co. in Beijing, which oversees the equivalent of $7.21 billion. “Corporate earnings have yet to catch up.”
• SAIC Motor fell -3.3% to 14.20 yuan. Beiqi Foton Motor, China’s biggest commercial-vehicle maker, lost -4.1% to 12.32 yuan. Fengfan, a manufacturer of automobile batteries, declined -6.3% to 14.54 yuan, after more than tripling this year through May 18.

Financial Indicators:

Metric	Value	Point change	% change
Hang Seng Index	17,199	-276.35	-1.58%
Shanghai Composite	2,611	-40.79	-1.54%
Shenzhen Component	10,109	-344.54	-3.30%
TAIEX	6,719	15.19	0.23%
CNY/USD	6.8295	-0.0004	-0.01%

Source: China Economic Scan