20 May 2009 Edition | China Economic Scan

20-May-2009

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

In this edition: China and Brazil said to have huge trade potential, Macao's property transactions fall 16% in Q1, Chinalco-Rio Tinto deal gets approval from US regulator, Agricultural Bank raises $7.3bln in bond sale, Chinese stocks rise to 9 month high.

Top 5 headlines

China, Brazil have huge trade potential: former ambassador

• Former Chinese ambassador to Brazil, Chen Duqing, said that the two sides 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. Imported goods were mainly soybeans, aquatic and livestock products. China imported vegetable oil, cotton and fruit worth $8.79 billion from Brazil last year, an increase of 82.4% from a year ago.

Macao's property transactions down 16.9% in Q1

• Based on Stamp Duty records, a total of 1,664 building units were sold and purchased in the first quarter of 2009, decreasing by 16.9% over the fourth quarter of last year.
• The total value of property transactions in the period dropped 20.5% quarter-to-quarter to just 2.13 billion patacas (US$270 million).
• 801 units, were residential units, valued at a total of 1.27 billion patacas (US$161 million), decreasing by 37.7% and 41% respectively quarter-to-quarter, the DSEC figure showed.

Chinalco-Rio Tinto deal gets approval from U.S. regulator

• The Committee of Foreign Investment in the United States granted clearance to Rio Tinto regarding the proposed issue of convertible bonds to Aluminum Corp. of China.
• In February, Chinalco signed to invest 19.5 billion U.S. dollars in the iron ore giant Rio Tinto of Australia, the world's third-largest mining company, to secure resource supplies for China and help cut Rio's heavy debt.
• Under terms of the planned deal, Chinalco will invest US$7.2 billion in convertible bonds and US$12.3 billion in Rio Tinto iron ore, copper and aluminum stakes.

Agricultural Bank Raises $7.3 Billion in Bond Sale

• Agricultural Bank of China, raised 50 billion yuan ($7.3 billion) in the nation’s biggest corporate bond sale to boost capital and help pave the way for an initial public offering (IPO).
• The IPO, planned for as early as the second half of this year, would be the biggest by a Chinese lender since 2006 and cap a decade-long reorganization of the banking industry that cost $650 billion.
• Agricultural Bank sold 20 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 the nation’s interbank market.

China’s Stocks Rise to Nine-Month High on Stimulus Expectations

• Chinese stocks closed up, arriving at 9 month highs on Tuesday. The Hang Seng rose +3.06% to 17,544, Shanghai Composite +0.90% to 2,677, Shenzhen Component up +1.07% to 10,424.
• “The government is quite determined to get a recovery,” said Philippe Zhang, chief investment officer at AXA SPDB Investment Managers in Shanghai, which oversees about $220 million. “The market is still quite strong.”
• Pudong Bank gained +3.2% to 25.99 yuan, the most since April 29. Shenzhen Bank rose +2.2% to 17.89 yuan. PetroChina gained +1.4% to 13.15 yuan. The company 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.” China Oilfield Services, an oil driller, rose +1.5% to 16.63 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,544	521.12	3.06%
Shanghai Composite	2,677	23.9	0.90%
Shenzhen Component	10,424	110.32	1.07%
TAIEX	6,656	77.78	1.18%
CNY/USD	6.8292	-0.0023	-0.03%

Source: China Economic Scan

19 May 2009 | China Economic Scan

19-May-2009

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

In this edition: Auditor reports on spending of stimulus plan funds, China gold reserves to back Yuan internationalization, Ping An expects steady year in 09, Esprit falls in Hong Kong on EU data, Chinese stocks close up on Monday.

Top 5 headlines

Auditor: China's stimulus plan goes well, with minor exceptions

• China's National Audit Office (NAO) said Monday that no major problems, but some notable minor ones, had been found as of the end of the first quarter by its oversight of the country's stimulus package.
• Of the 100 billion yuan (14.64 billion U.S. dollars) allocated by the central government last year, all had been disbursed. Another 130 billion yuan appropriated in February had been mostly distributed, NAO said.
• The 230 billion yuan investment was included in the 4-trillion-yuan package announced late last year to combat the global economic downturn.

China Gold Reserves May Back Yuan Internationalization

• China's gold reserves may serve as backing for the yuan as Beijing promotes its use overseas, said Zheng Lianghao, managing director of the World Gold Council's Far East division.
• Zheng said increasing gold holdings would provide China with a useful hedge as the dollar faced the possibility of depreciation.
• In April China's gold reserves had risen 454 metric tons since 2003 to 1,054 tons.

Ping An Expects ‘Steady Year’ of Profit in 2009, President Says

• Ping An Insurance, China’s second-largest insurer, will have a “steady year” of profit as an equity-market rally boosts returns and premium growth will be “very strong,” President Louis Cheung said.
• Ping An’s first-quarter profit fell 72% as lower bond yields, following five interest rates cuts since September, and higher expenses tempered investment returns.
• “This year will be a steady year for us,” Cheung said. “We expect to maintain very strong growth in premiums and in other business lines.”

Esprit Falls on Concern European Slump May Harm Sales

• Esprit, which makes 85% of sales in Europe, fell as much as 6.8% to HK45.60, the biggest intraday drop since May 8.
• The retailer said May 13 that sales in the nine 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.

China shares up on hope of reviving economy

• Chinese stocks edged up on Monday with the Hang Seng up 1.38% to 17023, the Shanghai Composite up 0.28% to 2,653, and the Shenzhen Component up 0.40% at 10314.
• "It's still a strong market. Investors are closely watching government policies and betting on when the economy would revive," said Chen Jinren, an analyst for Huatai Securities.
• China Shenhua Energy, the country's biggest coal producer, jumped 3.2% to 28.05 yuan; Kailuan Clean Coal soared by the daily upside limit of +10% to 35.44 yuan, while Datong Coal Industry Co. gained +9.84% to 37.73 yuan. Tangshan Iron & Steel surged +5.1% to 7.28 yuan and Handan Iron & Steel added +3.5% to 4.97 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,023	232.21	1.38%
Shanghai Composite	2,653	7.52	0.28%
Shenzhen Component	10,314	40.81	0.40%
TAIEX	6,578	88.72	1.37%
CNY/USD	6.8315	0.004	0.06%

Source: China Economic Scan

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