4 June 2009 | China Economic Scan

4-June-2009

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

In this edition: China says quick rebound in trade is unlikely, JP Morgan economist predicts housing price rally in China, Morgan Stanley raises Chinese stocks to 'neutral', Shanxi province plans coal futures exchange, Chinese stocks surge to 10-month high on Wednesday.

Top 5 headlines

China Says Quick Rebound in Trade Is Less Likely

• China said a quick rebound in trade is becoming less likely, with the nation’s exports and imports set to decline in the first half of this year.
• “China’s exports may start to grow as early as January after the major economies such as the U.S. and Japan gradually recover later this year,” said Xing Ziqiang, a Beijing-based economist at China International Capital Corp.
• Trade faces “unprecedented difficulties” and the outlook for the second half is not optimistic, Vice Commerce Minister Zhong Shan said in a statement about export credit insurance posted on the ministry’s Web site today. He didn’t elaborate on why a speedy recovery has become less likely.

Economist predicts housing price rally

• China's housing prices are predicted to rise by 5 to 10% this year and will keep a growth of 10% next year, Frank Gong, chief economist at JP Morgan, said.
• Hui Jianqiang, analyst of E-house China R&D Institute in Shanghai, echoed Gong's prediction as he said housing investment and sales are not in balance. "It is necessary for the government to adopt policies to lower the proportion of capital fund, in order to spur investment in real estate," Hui said.
• Urban residents have relatively high saving rates that will be sufficient to support consumption, Gong said. He added that the fast growing urban population indicates a huge domestic housing demand.

China Stocks Raised to ‘Neutral’ at Morgan Stanley

• China stocks were upgraded to “neutral” at Morgan Stanley, which said the growth in liquidity globally is boosting asset prices.
• The brokerage also increased its “base case” target for the MSCI China Index to 50.9 from 36.3, Morgan Stanley’s Hong Kong-based strategist Jerry Lou wrote in a note today. He had cut the rating on Chinese stocks to “cautious” in April.
• “A mini asset-economy upcycle, courtesy of aggressive policy-driven liquidity globally, could be developing,” Lou wrote. “Liquidity’s transference into borrowed prosperity could develop and carry the current market rally beyond 2009.”

Shanxi plans coal futures bourse

• Shanxi province, China's largest coal producer, said it has plans to establish the country's first coal and coke futures exchange to help stabilize the domestic market and secure a bigger voice in international pricing.
• "We have submitted a feasibility study to the authorities with the aim of establishing the market in 2012," said Wang Hua, director at the Shanxi provincial capital market development office.
• Shang Fulin, chairman of China Securities Regulatory Commission (CSRC), yesterday said at the sixth Shanghai Derivatives Market Forum that the CSRC would continue to encourage more futures products in China to help domestic enterprises hedge against financial risks.

China shares hit 10-month high, led by financials

• Chinese stocks surged again on Wednesday, the Shenzhen Component lead up +2.17% to 10,712, the Shanghai Composite rose +1.99% to 2,779, and the Hang Seng rose +1.02% to 18,576.
• Midsize lender Pudong Development Bank soared by the daily maximum of +10% to 28.73 yuan. Industrial & Commercial Bank of China, China's biggest commercial lender, soared +4.2% to 4.69 yuan. Bank of China gained +3.03% to 3.74 yuan.
• Property developers rose for a third day on hopes of a revival in China's real estate market. China Vanke, the country's biggest developer, advanced +6.1% to 10.84 yuan, while rival Poly Real Estate Group, surged +9% to 25.34 yuan.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,576	187.39	1.02%
Shanghai Composite	2,779	54.29	1.99%
Shenzhen Component	10,712	227.98	2.17%
TAIEX	6,893	-55.94	-0.80%
CNY/USD	6.8306	-0.0049	-0.07%

Source: China Economic Scan

3 June 2009 | China Economic Scan

3-June-2009

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

In this edition: Geithner says China has confidence in US economy, China to speed up nuclear power development, China alocates $878m for low-rent housing, Goldman Sachs sells shares in ICBC for $1.91bln, Chinese stocks edge up on Tuesday.

Top 5 headlines

Geithner Says China Has Confidence in U.S. Economy

• Treasury Secretary Geithner said China, the biggest holder of U.S. Treasuries, has expressed confidence in the U.S. economy and the Obama administration’s actions to fight the recession.
• “China will be shooting themselves in the foot if they push this issue too hard,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “If they are too alarmist and contribute substantially to a dollar and Treasuries sell off, they are going to feel more pain than just about anybody in the world.”
• “You have established good working relationships with your Chinese colleagues and you are committed to increasing China-U.S. cooperation in tackling the international financial crisis,” President Hu Jintao said at a meeting at the Great Hall of the People. “I appreciate that.”

Official: China to speed up nuclear power development

• China's nuclear power capacity is expected to reach about 5% of the country's total power capacity by 2020, according to National Energy Administration (NEA).
• The target is higher than the original one set in 2007, which aimed for a nuclear power capacity of 40 million kw by 2020, taking up 4% of the total power capacity.
• At present, China's nuclear power takes up 2% of the total power generation, while coal-fired power covers more than 80% of the total. 15% of world power generation comes from nuclear energy.

China allocates $878 mln for low-rent house building fund

• China's Ministry of Finance (MOF) announced Monday that the central government had earmarked the second batch of 6 billion yuan (878 million U.S. dollars) as special fund for low-rent house building projects across the country this year.
• The central government allocated the first batch of 7 billion yuan fund for this purpose in April, thus completing the goal of providing 13 billion yuan of subsidy for this year.
• Figures released on May 21 by the National Development and Reform Commission, China's top economic planner, showed that 214,000 low-rent housing units had been built by April since the government launched the 4-trillion-yuan stimulus package last November, with construction on another 650,000 units underway nationwide.

Goldman Sachs Raises $1.91 Billion Selling Shares in ICBC

• Goldman Sachs Group, which wants to return $10 billion this month to the U.S. government, raised HK$14.8 billion ($1.91 billion) by selling shares of Industrial & Commercial Bank of China after the stock jumped 29% in two months.
• The New York-based firm sold 3.03 billion Hong Kong-traded shares, or a 0.9% stake in the Chinese bank, at HK$4.88 apiece.
• “It’s very opportunistic, and obviously they’re not the first to come to the market to do that,” said Douglas Ciocca, a managing director at Renaissance Financial Corp. “It’s a prudent reallocation of capital because they still have a big remaining stake in there.”

China’s Stocks Rise to 10-Month High; Developers Lead Advance

• Chinese stocks were mixed on Tuesday with the Hang Seng falling -2.64% to 18,389, but Shanghai Composite registered a small gain of +0.11% to 2,724, and Shenzhen Component rose +0.60% to 10,484.
• Huaxia Bank, partly owned by Deutsche Bank, dropped -1.1% to 10.08 yuan. The bank said 1.58 billion shares, or 32% of its share capital, will become tradable on June 8. The stock is owned by 25 of its biggest shareholders, it said.
• Anhui Jianghuai Automobile, China’s second- biggest light-truck maker, jumped +4.3% to 6.10 yuan after yesterday’s trading suspension. The company said it has no “immediate” plan for any restructuring that involves Chery Automobile Co. Ningbo Yunsheng Group lost -3.9% to 11.14 yuan. The company said its biggest shareholder sold 3.75 million shares, or 0.95% of the company’s total.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,389	-499.51	-2.64%
Shanghai Composite	2,724	3.02	0.11%
Shenzhen Component	10,484	62.98	0.60%
TAIEX	6,949	-5.02	-0.07%
CNY/USD	6.8355	0.0084	0.12%

Source: China Economic Scan

2 June 2009 | China Economic Scan

2-June-2009

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

In this edition: Chinese PMI comes in at 53.1 for May, NDRC says gasoline and diesel benchmark retail prices to rise, Melco opens $2bln casino in Macau's Cotai strip, academics and industry practitioners say derivatives not a bad thing, Chinese stocks jump 3% on Monday.

Top 5 headlines

Chinese Manufacturing Grows, Adding to Evidence of Recovery

• The official Purchasing Manager’s Index (PMI) was at a seasonally adjusted 53.1 in May after registering 53.5 in April, the Federation of Logistics and Purchasing said.
• A reading of the PMI above 50 indicates an expansion.
• Industrial production growth may accelerate to 8% this quarter as stimulus spending gathers momentum, up from 7.3% last month and 5.1% in the first three months, the Ministry of Industry and Information Technology said May 22. Output may increase 10% in the second half, it added.

China to raise gasoline, diesel benchmark retail prices

• China will raise gasoline and diesel benchmark retail prices by 400 yuan (58.6 U.S. dollars) per tonne as of Monday, the National Development and Reform Commission (NDRC) said.
• The benchmark retail price for gasoline would increase by 7% and the price of diesel by 8%, according to the NDRC
• According to the new mechanism, China's domestic fuel prices are to be "indirectly linked" to global crude prices "in a controlled manner." China would adjust domestic fuel prices when global crude prices reported a daily fluctuation band of more than 4 percent for 22 working days in a row.

Melco Opens $2 Billion Casino in Macau’s Cotai Strip

• Melco Crown Entertainment Ltd. opens its City of Dreams casino today in a $2 billion bet that Macau will rebound from a slump that prompted rival Las Vegas Sands Corp. to halt construction on a neighboring project.
• The complex on Macau’s Cotai Strip has 516 gambling tables in a 420,000-square-foot casino, Hard Rock and Grand Hyatt hotels as well as a multimedia theater and shops run by DFS.
• “The gaming sector had a very bad year in 2008 because of a weakening Macau economy,” Winson Fong, who helps manage $2 billion at SG Asset Management H.K. Ltd., said. “Now, people are buying into the sector because as a speculative one, it tends to perform better during a recovery,”

'Let more firms trade in futures'

• Allowing more Chinese companies to trade in the international futures market is a better solution to protect State-owned enterprises (SOEs) from potential losses in overseas derivatives trading than simply blaming the investment banks that offer these products, experts said.
• Despite the fact that some SOEs have suffered enormous losses, derivatives continue to be a very important financial instrument for large corporations around the world, including Chinese companies, to hedge business risks, Hu Yuyue, a futures professor at Beijing Technology and Business University.
• According to the professor, a report from the International Swaps and Derivatives Association (ISDA) indicated that over 94% of Fortune 500 companies use derivatives as a tool to manage risks.

China Stocks Rise Most in Three Months as Manufacturing Expands

• Chinese stocks recorded strong gains with the Hang Seng up 3.95% at 18,889, the Shanghai Composite up 3.36% to 2,721, and the Shenzhen Component up 2.90% to 10,421.
• “The pick-up in the economy is better than expected and that’s giving investors a strong reason to buy,” said Wu Kan, a Shanghai-based fund manager at Dazhong Insurance Co., which manages about $285 million.
• Jiangxi Copper, the country’s biggest producer of the metal, surged +9.1% and Industrial & Commercial Bank of China gained +3.7%. PetroChina climbed +4.9% after China increased fuel prices and crude oil rose to a 7-month high. China Vanke added +4.3% after the government eased requirements for real-estate projects.

Financial Indicators:

Metric

Value

Point change

% change

Hang Seng Index	18,889	717.59	3.95%
Shanghai Composite	2,721	88.35	3.36%
Shenzhen Component	10,421	293.43	2.90%
TAIEX	6,954	63.66	0.92%
CNY/USD	6.8271	-0.0054	-0.08%

Source: China Economic Scan

1 June 2009 | China Economic Scan

1-June-2009

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

In this edition: Chinese economists see risk in holding US bonds, Chinese MOFCOM to encourage foreign investment after a 22.5% fall in FDI, China's banking regulator and Finance Ministry warned banks on making risky loans, Chinese industrial profits drop 28%, China's Agricultural Bank may still be some time away from IPO.

Top 5 headlines

Chinese economists deem huge holding of US bonds "risky," split on way out

• On the first day of U.S. treasury secretary Timothy Geithner's visit to China, the Beijing-based Global Times published a survey of 23 famous Chinese economists on Sunday, saying that the majority of them deemed the vast holding of U.S. bonds "risky."
• Among the 23 experts polled, 17 said they believed that holding U.S. equities pose great risks to China's economy.
• However 15 of the interviewed economists said they were against the idea to quickly offload China's possession of U.S. debt as a means to strengthen the country's financial stability and decrease Beijing's vulnerability to the already ailing world economy.

China's Ministry Of Commerce To Encourage Foreign Invest

• The Chinese Ministry of Commerce said it would seek to actively encourage foreign investment in China, ahead of U.S. Treasury Secretary Timothy Geithner's official meeting with Chinese authorities next week.
• China's actual foreign direct investment fell 22.5% on year in April to $5.89 billion, bringing actual FDI in the first 4 months of this year to $27.67 billion, down 21% from a year earlier.
• There were roughly 666,000 foreign-invested companies in China as of end April, about 3% of the country's overall number of companies. These foreign-invested firms contributed to 29.7% of China's overall industrial output and 21% of the country's tax revenue in 2008.

China regulator warns banks on risky loans

• China's banking regulator and the Finance Ministry on Sunday warned banks against issuing risky loans, saying they must step up their risk management.
• Banks extended 5.17 trillion yuan ($757.2 billion) in loans in the first 4 months, exceeding the government's minimum target of 5 trillion yuan for all of 2009 and fanning fears among analysts that banks were taking undue credit risks.
• In offering loans, banks must make a careful assessment of the borrowers' needs, to ensure the company in question is not using the money for 'blind expansion', the statement said.

China Jan-Apr industrial profits drop 28 pct yr/yr

• Chinese industrial profits in the first 4 months in 22 provinces fell 27.9% from a year earlier, narrowing a drop seen in Q1, the National Bureau of Statistics (NBS) said.
• In April, 23 out of 39 sectors saw their profit growth rebound or their losses narrow, the NBS said in a statement on its website (www.stats.gov.cn).
• Petroleum refining and coking industry profits reached 26.66 billion yuan ($3.9 billion) in the first 4 months, surging 181.3% year on year. The electricity sector made a profit of 2.19 billion yuan as of the end of April, in sharp contrast with a 1.37 billion loss made in Q1.

China’s Agricultural Bank May Not List This Year, Finet Reports

• Agricultural Bank of China probably won’t list its shares this year, Finet news service reported, citing 2 bank executives it didn’t name.
• The bank plans to open branches in New York and London this year to prepare for a global commodity-trading system before seeking a public listing.
• Agricultural Bank expects to acquire licenses to start operations in the U.S. and U.K. next year.

Source: China Economic Scan

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