China Economic Scan Weekly Economic Review - 31 May 2009

China Economic Scan Weekly Economic Review - 31 May 2009

31/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

In the week that was, the Chinese government revealed more statistics about spending of the stimulus package, and encouraged its local governments to match spending. Elsewhere growth forecasts were raised, energy prices were touted to increase and signs of gold fever stirred.

China's central government has allocated 270 billion yuan (US$39.7 billion) for infrastructure investment so far this year, according to the National Development and Reform Commission (NDRC). The spending is part of a planned total of 367.6 billion yuan in the 2009 central budget and brings the total already allocated since Q4 2008 to 300 billion yuan.

China has urged its local governments to cough up funds so that projects in its 4-trillion-yuan ($586 billion) stimulus plan can be completed on time. Estimates are that local governments will need to raise 170 billion yuan to match the central government's first two batches of investment of 230 billion yuan. Previously a National Audit Office report found that "only 48% of the funds local governments had to contribute for 335 projects are in place".

That said, China’s growth prospects have apparently improved from three months ago, this is in spite of drops in steel and electricity output and the risk of a manufacturing contraction this month. The world’s third-largest economy will expand 7.5% this year, according to a median estimate of 14 economists surveyed by Bloomberg News, up from an earlier forecast of 7.1% in February this year.

Internationally, China is looking to increase investment from multinational corporations, Vice Premier Li Keqiang said. "We continue our opening-up policy and oppose trade protectionism in any form," Li told visiting GE Chairman and Chief Executive Officer Jeff Immelt, saying that China offered opportunities for multinationals to expand their business and investment. Li said the government is trying to foster the development of high-tech and strategic emerging industries.

China, the world’s second-biggest energy user, may raise gasoline and diesel prices by about 10% by next weekend. “We believe China is forced into a corner” and will raise prices “as soon as this weekend, and if not, very likely by next weekend following OPEC’s strong resolve to support higher oil prices,” said Gordon Kwan, the head of energy research at Mirae Asset Securities in Hong Kong.

In signs of gold fever hitting China, gold prices quoted on the Shanghai Gold Exchange (SGE) increased by an average 6.74% in the past month to the current level of about 209 yuan a gram. "Gold demand in China in the first quarter rose to 114 tons, up 2% over the same period last year, solely boosted by an increase in jewelry demand," according to the World Gold Council. The report also noted that global demand for gold rose 38% year-on-year to 1,016 tons. China is the world's second largest gold consuming country after India.

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 - 31 May 2009

China Economic Scan Weekly Stockmarket Review - 31 May 2009

31/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

Chinese stocks closed the week up; the Hang Seng lead by a whopping 6.5% at 18,171, the TAIEX followed with 2.27%, Shanghai closed up 1.36% to 2633 and Shenzhen was up 0.55% to 10,128.

The gains put the Shanghai index up 45% so far this year, with gains for each of the first 5 months of this year. "Ample liquidity and optimism about economic recovery have contributed to the monthly rally," said Wang Peng, Shanghai-based chief investment officer at First Trust Fund Management Co. "The gains may not last if we fail to see more good economic and corporate data."

In a very interesting development, 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. New guidelines issued by the CSRC aim to improve the price discovery function of the stock market, and help retail investors subscribe to newly issued stocks.

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. Intel Capital, the investment arm of Intel Corporation invested in the company earlier this year. The company was built in Hangzhou Hi-tech Industry Development Zone, and is engaged in building of intelligent traffic, medical, educational, security, financial and office systems.

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.

Xinao Gas Holdings, a distributor of piped natural gas in Mainland China, Executive Director Wilson Cheng said sales would rise by at least 25% each year until 2014. Xinao aims to sell 2.8 billion cubic meters of gas this year, compared with 2.2 billion in 2008. Xinao, based in Hebei province in northern China, forecasts it will connect 750,000 more households to the gas network this year, up to a total of 4.5 million.

Bain Capital may buy as much as 20% of Gome Electrical Appliances Holdings, China’s second-largest electronics retailer, for about $500 million. Bain is apparently competing for Beijing-based Gome with KKR & Co. and Warburg Pincus. Gome’s more than 800 stores in at least 160 Chinese cities make it an attractive target for investors faced with stagnant economies in the U.S., Europe and Japan.

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 Debt Market Review – 31 May 2009

China Economic Scan Weekly Debt Market Review – 31 May 2009

31/05/2009. Source: China Economic Scan. Callum Thomas, Managing Director, China Economic Scan

The CSI Enterprise Bond Index started on Monday at 118 even, and dipped down to lows of 117.60, before closing the trading week up at 118.10 on Wednesday. The Shenzhen Corporate Bond Index started the week at 130.77, dropped to a low of 130.47, and rallied to close the short week up at 130.85.

China's Ministry of Finance (MOF) said it would issue 16.9 billion yuan (US$2.48 billion) of 3-year local government bonds 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.

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. It said credit risks will asses a country's political environment, economic power, fiscal status, foreign debt and liquidity, adding that it judges the credit of a sovereign entity on the basis of a comprehensive evaluation of its fiscal strength and foreign reserves.

SOHO China, the biggest property developer in Beijing's Central Business District, said the proceeds from a $359 million 5-year convertible bond issue, with a coupon rate of 3.75% a year, would be earmarked for general corporate purposes and strategic acquisitions. The bonds will be convertible into 476.2 million ordinary shares, accounting for 8.4% of SOHO's enlarged share capital.

China Construction Bank, the world’s 3rd-largest lender by market value, rose in Hong Kong trading after the company’s largest government shareholder raised its stake and promised to buy more shares. The Beijing-based company has acquired about 57.8 million Shanghai-traded shares of Construction Bank over the past 6 months at a price range between 3.71 yuan and 4.18 yuan a share, according to yesterday’s statement.

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

30 May 2009 | China Economic Scan

30-May-2009

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

In this edition: China economists raise growth forecasts, China may raise gasoline and diesel prices, Gold fever hits Chinese investors, Rocawear owner forms venture with Bosideng, Shanghai Gold Exchange marks 134% increase in trading.

Top 5 headlines

China Economists Raise Growth Forecasts Amid Signs of Weakness

• China’s growth prospects have improved from three months ago, even after accounting for drops in steel and electricity output and the risk of a manufacturing contraction this month, economists’ forecasts show.
• The world’s third-largest economy will expand 7.5% this year, according to the median estimate of 14 economists surveyed by Bloomberg News, up from a 7.1% forecast in February.
• Gross domestic product expanded 6.1% in the first quarter, the slowest pace in almost 10 years.

China May Raise Gasoline, Diesel Prices, Analyst Says

• China, the world’s second-biggest energy user, may raise gasoline and diesel prices by about 10 percent by next weekend as higher oil prices are leading to losses at the nation’s refiners, according to an analyst.
• Crude has surpassed $60 a barrel, putting pressure on Chinese refiners, Gordon Kwan, the head of energy research at Mirae Asset Securities in Hong Kong, said in an e-mail today.
• “We believe China is forced into a corner” and will raise prices “as soon as this weekend, and if not, very likely by next weekend following OPEC’s strong resolve to support higher oil prices,” Kwan said.

Gold fever grips Chinese investors

• Gold prices quoted on the Shanghai Gold Exchange SGE have increased by an average 6.74% in the past month to the current level of about 209 yuan a gram.
• "Gold demand in China in the first quarter rose to 114 tons, up 2% over the same period last year, solely boosted by an increase in jewelry demand," according to the latest Gold Demand Trends report for the first quarter of 2009 published by the World Gold Council.
• The report said global demand for gold rose 38 percent year-on-year to 1,016 tons, representing a 36% rise in value. China is the world's second largest gold consuming country after India.

Rocawear Owner Forms Venture With Bosideng to Open China Stores

• Rocawear, a brand co-founded by rapper Jay-Z, may sell clothes through 300 China stores after its owner entered into a venture with Bosideng International Holdings Ltd., the country’s biggest maker of down jackets.
• Bosideng said in a statement to Hong Kong’s stock exchange that it will partner with Iconix China Ltd. to sell the Rocawear range of men’s and women’s products in China by next year.
• Bosideng fell -1% to HK$1.04 in Hong Kong trading. Bosideng shares have gained +42% this year, compared with +26% for the benchmark Hang Seng Index.

Shanghai gears up for the big league

• With gold gaining a greater role in China's foreign exchange portfolio, experts feel that it is only a matter of time before Shanghai becomes a major gold trading market.
• Around 4,220.7 tons of gold was traded at the bourse in 2008, worth 822.9 billion yuan ($120.52), up 134.19% and 164.15% year-on-year, respectively, making it the world's top exchange for spot gold trading.
• "Although Shanghai still lags behind other gold trade centers like Hong Kong, New York and London in terms of global influence, China's robust economic growth and the city's plans to turn itself into a global financial center will give it an added advantage," said Albert Cheng, director of the World Gold Council's Far East Division.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,171	285.73	1.60%
Shanghai Composite	2,633
Shenzhen Component	10,128
TAIEX	6,890
CNY/USD	6.8325

Source: China Economic Scan

29 May 2009 | China Economic Scan

29-May-2009

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

In this edition: Chinese investment rises in Lat-Am, Northeast Electric goes into trading halt following Buffett rumours, Shenzhen Stock Exchange to promote construction of multi-level capital market, SOHO plans $359m bond float, Shanghai stocks are up 45% YTD.

Top 5 headlines

Chinese investment rises in Latin America: ECLAC

• Executive Secretary of the Economic Commission for Latin America and the Caribbean (ECLAC) Alicia Barcena said Chinese investment in Latin America is showing substantial increases.
• In the report, ECLAC also cited the deals that the Aluminium Corporation of China reached with Anglo-Australian mining giant Rio Tinto to invest US$19.5 billion in its Peruvian mines, and China Metals agreed with Australia's Oz Minerals to invest US$17 billion in its mines in Latin America.
• Regional foreign direct investment was around US$128.3 billion in 2008, a record figure despite the world's financial crisis. However, the figure is estimated to drop as much as 45% this year, due to the prolonged financial crisis, said the report.

Northeast Electric Halts Trading On Talk Of Buffett Invest

• Shenzhen listed Northeast Electric Development suspended the trading of its shares in both Shenzhen and Hong Kong Wednesday, saying it plans to clarify a local media report on speculation that Warren Buffett may invest in the company.
• Without citing a source, the Shanghai newspaper reported Wednesday that there is talk the U.S. billionaire is negotiating with Northeast Electric's major shareholders over a stake transfer. The paper didn't give other details.
• Its H shares were up 59% at HK$2.26 before trading was halted in Hong Kong at 0250 GMT.

Shenzhen Stock Exchange: To Promote the Construction of the Multi-level Capital Market

• Song Liping said the Shenzhen Stock Exchange shall continue promoting the reform of the systems of IPO and refinancing, enhancing financing efficiency and improving supervision system and means.
• Chen Dongzheng, general-director of Shenzhen Stock Exchange said SME board has made great contribution to the forthcoming launching of the new market and the construction of multi-level capital market.
• Chen stressed that the risks of new market shall be considered and undertaken due to the significance of the new market.

SOHO plans $359m bond float

• SOHO China, the biggest property developer in Beijing's Central Business District, is filling up its war chest for future acquisitions with a $359 million bond issue.
• The Hong Kong-listed developer said the proceeds from the five-year convertible bonds, with a coupon rate of 3.75% a year, would be earmarked for general corporate purposes and strategic acquisitions.
• The bonds will be convertible into 476.2 million ordinary shares, accounting for 8.4% of SOHO's enlarged share capital. The bond will be issued at HK$5.88 each, representing a 20% premium over the stock closing price of HK$4.90 on Tuesday.

Index shows 5th straight monthly gain

• Chinese markets were closed on Thursday (and will be on Fri) for Dragon boat festival after completing a fifth monthly gain, as raw-material producers and shipping companies climbed on higher commodity prices and increased transportation rates.
• "Ample liquidity and optimism about economic recovery have contributed to the monthly rally," said Wang Peng, Shanghai-based chief investment officer at First Trust Fund Management Co. "The gains may not last if we fail to see more good economic and corporate data."
• The Shanghai index has posted gains every month this year for a 45% rally on optimism a 4-trillion-yuan stimulus package and record lending would revive growth.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,885
Shanghai Composite	2,633
Shenzhen Component	10,128
TAIEX	6,890
CNY/USD	6.8310

Source: China Economic Scan

28 May 2009 | China Economic Scan

28-May-2009

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

In this edition: China urges local governments to spend stimulus money, China organises industry purchasing tours of Taiwan, Bain said to lead KKR in bid for 20% of Gome, China Construction Bank rises after Huijin increases holding, Hong Kong stocks rise over 5% on Wednesday.

Top 5 headlines

Local govts urged to provide stimulus money on time

• China has urged its local governments to cough up funds to ensure major projects in its 4-trillion-yuan ($586 billion) stimulus plan could be completed on time.
• It is estimated that local governments need to raise 170 billion yuan to match the central government's first two batches of investment of 230 billion yuan, Zhang Shaochun, vice-minister of finance, told four specialized committees of the National People's Congress yesterday.
• Zhang's statement comes close on the heels of a National Audit Office report, which found that "only 48% of the funds local governments had to contribute for 335 projects are in place".

Chinese mainland organizes industry purchasing tours of Taiwan

• The Chinese mainland has organized schedules for industry purchasing groups to Taiwan from May to September, to help develop the island economy during global financial crisis.
• "The preparations are underway and we plan to convene seven to nine purchasing groups in next five months," said Yang Yi, spokesman of the State Council Taiwan Affairs Office at a press conference Wednesday.
• He said the China Video Industry Association would organize a visit of leading mainland TV producers on June 1 with planned procurement of about US$2.2 billion.

Bain Said to Lead KKR in Bid for 20% of China’s Gome

• Bain Capital may buy as much as 20% of Gome Electrical Appliances Holdings, China’s second-largest electronics retailer, four people familiar with the discussions said.
• Bain may pay about $500 million for the stake, two of the people said, asking not to be identified because the talks are confidential. Bain is competing for Beijing-based Gome with KKR & Co. and Warburg Pincus, the people said.
• Gome’s more than 800 stores in at least 160 Chinese cities make it an attractive target for investors faced with stagnant economies in the U.S., Europe and Japan. KKR and TPG Inc. are among private-equity firms that have sought stakes in companies tied to domestic consumption growth in the past year.

China Construction Bank Rises After Huijin Boosts Stake

• China Construction Bank, the world’s third-largest lender by market value, rose in Hong Kong trading after the company’s largest government shareholder raised its stake and promised to buy more shares.
• The Beijing-based company has acquired about 57.8 million Shanghai-traded shares of Construction Bank over the past six months at a price range between 3.71 yuan and 4.18 yuan a share, according to yesterday’s statement.
• Construction Bank rose +1.9% to HK$4.88 as of 10:22 a.m. in Hong Kong and was up +0.7% to 4.49 yuan in Shanghai.

Hong Kong’s Stocks Surge to Seven-Month High; Li & Fung Rises

• Chinese stocks surged on Wednesday, the Shenzhen Component rose +1.05% to 10,128, the Shanghai Composite jumped +1.71% to 2,633, and the Hang Seng surged +5.26% to 17,885.
• Henderson Land Development Co., a Hong Kong-based developer controlled by billionaire Lee Shau-kee, gained +7.7%.
• Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc. and Target Corp., jumped +11% after U.S. consumer confidence climbed the most in six years. PetroChina, the nation’s largest oil producer, added +5.8% after oil prices rose.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	17,885	893.71	5.26%
Shanghai Composite	2,633	44.35	1.71%
Shenzhen Component	10,128	105.62	1.05%
TAIEX	6,890	207.33	3.10%
CNY/USD	6.8310	-0.0025	-0.04%

Source: China Economic Scan

27 May 2009 | China Economic Scan

27-May-2009

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

In this edition: China allocates 270 bln yuan for infrastructure investment YTD, China hopes for more investment from multinationals, Shandong plans auto behemoth, Xinao gas says sales may more than double in 5 years, Chinese stocks close down on Tuesday.

Top 5 headlines

China allocates 270 bln yuan for infrastructure investment so far in 2009

• China's central government has allocated 270 billion yuan (about US$39.7 billion) for infrastructure investment so far this year, a National Development and Reform Commission (NDRC) official told legislators Tuesday.
• That amount is part of a planned total of 367.6 billion yuan in the 2009 central budget.
• Adding another 30 billion yuan from last year's budget meant that the country had already allocated 300 billion yuan to infrastructure investment since the fourth quarter of last year, NDRC vice director Mu Hong told legislators.

China hopes for more investment from multinationals

• China hopes US-based General Electric (GE) and other multinationals would increase investment, Vice Premier Li Keqiang said Monday.
• "We continue our opening-up policy and oppose trade protectionism in any form," Li told visiting GE Chairman and Chief Executive Officer Jeff Immelt, saying that China offered opportunities for multinationals to expand their business and investment.
• Li said the government was striving to support the development of high-tech and strategic emerging industries.

Shandong plans auto behemoth

• Three auto parts makers, including a leading engine maker and an earthmover manufacturer, will merge to create an industrial conglomerate in Shandong province with sales projected to exceed 100 billion yuan by 2012, the latest industry consolidation move in China's fragmented auto sector.
• Weichai Holdings, Shandong Construction Machinery Group, and Shandong Auto Industrial Group, will form a venture called Shandong Heavy Industry Group Co, according to separate exchange filings by their listed units.
• The combined sales of the three listed companies amounted to more than 40 billion yuan in 2008, according to their annual reports.

Xinao Gas Says Sales May More Than Double in 5 Years

• Xinao Gas Holdings, a distributor of piped natural gas in mainland China, said sales may more than double over the next five years as demand for the cleaner-burning fuel increases.
• Sales will rise by at least 25% each year until 2014, Executive Director Wilson Cheng said in an interview today. Xinao aims to sell 2.8 billion cubic meters of gas this year, compared with 2.2 billion in 2008, the company said on April 8.
• Xinao, based in Hebei province in northern China, forecasts it will connect 750,000 more households to the gas network this year, taking its total number of customers to about 4.5 million.

China shares fall on property tax, liquidity fears

• Chinese stocks fell on Tuesday, the Shenzhen Component fell -1.57% to 10,022, the Shanghai Composite fell -0.82% to 2,610, and the Hang Seng fell -0.76% to 16,992.
• China Vanke, the country's biggest developer, fell -3% to 9.66 yuan, rival Poly Real Estate Group dropped -2.5% to 21.14 yuan and Financial Street Holding lost -3.3% to 10.15 yuan.
• Industrial and Commercial Bank of China, China's biggest commercial lender, edged +0.7% lower to 4.23 yuan while major refiner Sinopec, or China Petroleum & Chemical, fell -1.6% to 10.14 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	16,992	-130.26	-0.76%
Shanghai Composite	2,589	-21.43	-0.82%
Shenzhen Component	10,022	-159.86	-1.57%
TAIEX	6,683	-51.35	-0.76%
CNY/USD	6.8335	0.0096	0.14%

Source: China Economic Scan