Archive for December 29, 2011

China eclipses US as top IPO venue

China has again outshone the US as the top venue for initial public offerings despite steep share price falls on the mainland and Hong Kong stock markets, highlighting the shift in global financial activity from west to east.

Companies raised $73bn from IPOs in Shanghai, Shenzhen and Hong Kong this year, according to Dealogic – almost double the amount of money raised on the New York Stock Exchange and

Hong Kong retained its crown as the top bourse for the third year in a row, with $30.9bn raised this year. That figure compares with $30.7bn and $18bn, respectively, on the New York and London stock exchanges.

The results belied much weaker deal flow on mainland and Hong Kong exchanges this year, as market turmoil forced companies to delay share offerings and, in some cases, call them off at the last minute. The $73bn they raised was less than half last year’s total, compared with a 6 per cent decline in IPO fundraising on US exchanges.

The US last topped the IPO league tables in 2008.

Hong Kong’s benchmark Hang Seng index is also down nearly 20 per cent this year and China’s main index in Shanghai has fallen 23 per cent, making Chinese markets among the worst performing in the world. US stock markets are ending a volatile year where they began, with the Standard & Poor’s 500 index down less than 1 per cent as of Wednesday.

Until recently, Hong Kong rarely attracted listings by companies outside of China. But with western markets in a funk and the eurozone gripped by a sovereign debt crisis, the bourse has recently hosted a number of landmark IPOs by foreign groups including Prada, Glencore and Samsonite.

“The pipeline of deals is still very heavy in Hong Kong,” said Philippe Espinasse, author of IPO: A Global Guide. “A lot of deals were delayed or failed to launch this year, which means next year should be fairly busy as long as we get a breather on the macro front.”

Companies raised more than $41bn in Shenzhen and Shanghai, even as stock prices tumbled to three-year lows.

Chi-Next, a Shenzhen-based exchange for start-ups that is meant to be China’s answer to Nasdaq, raised almost $11bn in total. That compares with about $15bn raised in Shenzhen and $16bn in Shanghai.

Foreign investment banks have, however, failed to capitalise on the mainland capital-raising boom. Goldman Sachs, the world’s leading equity bookrunner by volume, has not underwritten a single IPO on the mainland since 2009.

Foreign investment banks are also under pressure in Hong Kong. Chinese securities firms have fought hard to win market share from their Wall Street rivals, pushing down overall fee levels as a result.

Chinese banks captured a combined 30 per cent of the Hong Kong IPO market this year, the most since 2006, according to Bloomberg. The average commission for underwriters in Hong Kong was just 2.2 per cent of an IPO’s proceeds compared with 3.5 per cent a decade ago.

China Market Wrap-28DEC2011

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.Puguang gasfield, China Petroleum & Chemical Corp’s (Sinopec) <0386.HK><600028.SS> largest, achieved its 2011 production target of 5.9 billion cubic metres of purified natural gas as of Dec. 23, a report on a company website showed on Wednesday.

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– China’s Alibaba Group, the parent of Ltd <1688.HK>, has hired Washington lobbying firm Duberstein Group Inc as it eyes a possible deal with Internet giant Yahoo Inc <YHOO.O>.

– Brazil mining company Vale <VALE5.SA><6210.HK> has docked one of its giant iron ore vessels in China for the first time, ending a year-long impasse with Chinese authorities that threatened to hobble the company’s plan to cut shipping costs to its biggest market. 
China Mengniu Dairy Co Ltd <2319.HK> lost nearly a quarter of its market value on Wednesday, with its shares plunging 26 percent to their lowest level in more than two years after the nation’s biggest dairy company was hit by a tainted milk scandal over the Christmas holiday. 
Fortune Real Estate Investment Trust <FORT.SI><0778.HK>, a property trust listed in Hong Kong and Singapore, said on Thursday it will buy two commercial properties in Hong Kong for HK$1.9 billion ($244.44 million).  
Guodian Technology & Environment Group Corp Ltd <1296.HK> said it priced its 1.063 billion H shares in IPO at HK$2.16 each, raising net proceeds of about HK$2.19 billion.
– Standard & Poor’s Ratings Services said today that it had affirmed and then withdrawn its ‘A-‘ long-term unsolicited corporate credit rating on Hong Kong-based property developer Cheung Kong (Holdings) Ltd. <0001.HK> as it was unable to accurately assess the credit quality of the company. It said the  stable outlook reflected that Cheung Kong will generate satisfactory cash flows and maintain conservative financial management over the next two years.
China Modern Dairy Holdings Ltd <1117.HK> said each of its breeding farm, including the breeding farms in Meishan area, was strictly followed quality control procedures in fodder procurement, cattle breeding, milk production and delivery, and is confident that the quality of its milk products meets the relevant health and safety requirements.
BYD Company Ltd <1211.HK> said China Securities Regulatory Commission had granted an approval to the Company to issue up to 6 billion yuan worth of domestic corporate bonds in China.

China Market Wrap-27DEC2011

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.A subsidiary of Shanghai Construction Group Co. Ltd. <600170.SS> will acquire gold mining assets in Eritrea, according to a company announcement. Shanghai Construction will acquire a 60 percent equity stake in Zara Mining Share Co. for $80 million, the statement said, citing a framework agreement signed by the two companies.

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– Thailand’s Bank of Ayudhya <BAY.BK>, the country’s fifth-largest lender, is tipped to win the bidding to buy HSBC’s <0005.HK> <HSBA.L> Thai credit card and retail business, which are worth up to $1.28 billion, sources close to the deal said on Tuesday.

China Resources Gas Group Ltd <1193.HK> said on Tuesday it would form a joint venture with a Chinese state-owned company to supply piped gas in Ningbo city, with proposed total investment of 4 billion yuan ($631.3 million).
China Mengniu Dairy Co Ltd <2319.HK>, the nation’s biggest dairy firm, said it had destroyed milk found to be contaminated with a cancer-causing substance, the latest food safety problem to hit the country’s dairy industry.
Mongolian Mining Corp <0975.HK> said its mine operating at the Ukhaa Khudag deposit located in the Tavan Tolgoi coalfield had achieved its 2011 annual production target of 7.0 million tonnes of run-of-mine coal.
China Southern Airlines Co Ltd <1055.HK> said its subsidiary Xiamen Airlines had agreed to sell two B737-700 aircrafts to Hebei Airlines for 426 million yuan.

Government Official Complains About People Getting Smarter

Shanwei Party Secretary Zheng Yanxiong: "If outside media can be trusted, then pigs can climb trees."

Translated from China Smack…

“Let’s find a some foreign journalists to come make a fuss. The worse you (Zheng Yanxiong) look out there, the happier we are. Then you’ll be in a trouble and your superiors will dismiss you.” Well, what good can come from having me dismissed? They’ll just send another Municipal Party Secretary here, and he may not be much better than Zheng Yanxiong [referring to himself]. Ha, this is a joke, but it also has truth to it.

If outside media can be trusted, then mother pigs can climb trees.

Reasonable demands [and] unreasonable methods [results in an] out of control process.

If compensation is necessary then there will be compensation, and the government will pay for it, because of course, wool only comes from sheep.

If you don’t make any more trouble, if you don’t break the law again, and the government feels, “hey, [they’re] reasonable, I think they won’t use unreasonable methods again”, then I don’t even have to use the armed police! You think deploying the armed police doesn’t cost money?! There are hundreds of armed police and for the police to be stationed here means our mayor’s wallet becomes thinner and thinner by the day, I’m telling you.

Right now there is only one group of people, who feel each year is harder than the last. Who are they? Those who are government cadres, including me. The Municipal Party Secretaries in the past were never this tired having to handle everything. Every day, our powers become smaller than the day before, the methods available to us less and less, our responsibilities are greater and greater, while the ordinary common people want more and more, getting smarter every day, becoming more and more difficult to manage by the day.

With regards to national polices, I myself also have deep feelings. A responsible government like this, you don’t look to. Instead, you look to some lousy foreign media, lousy newspapers, lousy websites, completely confusing good and bad! They won’t take any responsibility, nor can they do anything, They’re all too eager for you to get into fights, for socialism to fall into chaos. That’s when they’ll be happy. If you have a problem, go to the government. Don’t let outsiders gossip about it.

China Market Wrap-Up-26DEC2011

– China’s securities regulator has granted licenses to an initial batch of 19 brokerages and fund management companies, including Citic Securities<600030.SS><6030.HK>, Haitong Securities <600837.SS>, China Merchants Securities <600999.SS>, to invest offshore yuan in the domestic capital markets through their Hong Kong subsidiaries, two sources told Reuters. .
– A gas exploration well in southwestern Sichuan province owned by top Chinese oil and gas firm China National Petroleum Corp (CNPC), parent ofPetroChina <0857.HK><601857.SS>,  exploded and caught fire early on Thursday morning, in the latest disaster to hit the country’s energy sector.

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– China’s Yanzhou Coal Mining Co Ltd <1171.HK> said on Thursday it plans to merge its Australian unit with Gloucester Coal <GCL.AX> in a A$700 million deal that will create one of Australia’s largest listed coal companies. .
– PT Energi Mega Persada <ENRG.JK>, an oil and gas firm controlled by Indonesia’s Bakrie group, said on Thursday it will buy a 36.7 percent stake in Offshore North West Java (ONWJ) oil and gas block from China’sCNOOC <0883.HK> for $212 million.
– High-end menswear retailer Trinity Ltd <0891.HK> said its  exclusive distribution agreements for the sale of Ferragamo products in South Korea, Singapore, Malaysia, Thailand and Indonesia would expire at the end of 2012, and it would meet with Salvatore Ferragamo group to examine ways of continuing the business partnership.
– BOC Hong Kong (Holdings) Ltd <2388.HK>, the sole clearing authority for all offshore yuan transactions, said it will extend daily yuan trade settlement hours to encourage more banks in Europe and the United States to use the service.
– Developer Sino Land Co Ltd <0083.HK> on Thursday agreed to sell a Hong Kong shopping mall to property investment fund Link Real Estate Investment Trust <0823HK> for HK$588 million ($76 million).

RISE OF A NEW GLOBAL CURRENCY – China, Japan to Back Direct Trade of Currencies

The U.S Dollar and U.S. Treasuries are the most crowded trades on the planet. As a defunct U.S. empire’s citizens fight with each other to buy the new Air Jordan shoes with their printed transfer payments….The foundations of the empires currency are about to be torn down.
From Bloomberg..

China, Japan to Back Direct Trade of Currencies

By Toru Fujioka – Dec 25, 2011

Japan and China will promote direct trading of yen and yuan without using dollars and will encourage the development of a market for companies involved in the exchanges, the Japanese government said.

Japan will also apply to buy Chinese bonds next year, allowing the investment of renminbi that leaves China during the transactions, the Japanese government said in a statement after a meeting between Prime Minister Yoshihiko Noda and Chinese Premier Wen Jiabao in Beijing yesterday. Encouraging direct yen- yuan settlement should reduce currency risks and trading costs, Japan’s government said.

China is Japan’s biggest trading partner with 26.5 trillion yen ($340 billion) in two-way transactions last year, from 9.2 trillion yen a decade earlier. The pacts between the world’s second- and third-largest economies mirror attempts by fund managers to diversify as the two-year-old European debt crisis keeps global financial markets volatile.

“Given the huge size of the trade volume between the Asia’s two biggest economies, this agreement is much more significant than any other pacts China has signed with other nations,” said Ren Xianfang, a Beijing-based economist with IHS Global Insight Ltd.

China also announced a 70 billion yuan ($11 billion) currency swap agreement with Thailand last week as part of a plan outlined in October to promote the use of the yuan in the Association of Southeast Asia Nations and establish free trade zones. Central banks from Thailand to Nigeria plan to start buying yuan assets as slowing global growth has capped interest rates in the U.S. and Europe.

Offshore Yuan

The yuan traded in Hong Kong’s offshore market gained 0.5 percent offshore last week and touched 6.3324 per dollar, the strongest level since trading started in July 2010. Its discount to the exchange rate in Shanghai narrowed to 0.1 percent, from a record 1.9 percent on Sept. 23.

The yuan gained 0.05 percent in Shanghai to 6.3330 per dollar today and was little changed at 6.3450 in Hong Kong. It strengthened 4.3 percent this year, the best-performing Asian currency excluding the yen. The currency is allowed to trade 0.5 percent on either side of that rate. The yuan is a denomination of the renminbi.

Biggest Trading Partner

Japan exported 10.8 trillion yen to China in the year through November, and imported 12 trillion yen, according to Ministry of Finance data. The deficit with China widened to 1.2 trillion yen, from 418 billion yen in January-to-November 2010. About 60 percent of the trade transactions are settled in dollars, according to Japan’s Finance Ministry.

Finance Minister Jun Azumi said Dec. 20 buying of Chinese bonds would help reveal more information about financial markets in China. Noda said in September 2010, when he was finance minister, that Japan should be able to invest in China given that its neighbor buys Japanese debt. Japan holds $1.3 trillion of foreign-currency reserves, the world’s second largest after China’s $3.2 trillion.

Investing in Chinese debt has become easier for central banks as issuance of yuan-denominated bonds in Hong Kong more than tripled to 112 billion yuan ($18 billion) this year and institutions were granted quotas to invest onshore. Japan will start to buy “a small amount” of China’s bonds, a Japanese government official said on condition of anonymity because of the ministry’s policy, without elaborating.

China sold the second-biggest net amount of Japanese debt on record in October as the yen headed for a postwar high against the dollar and benchmark yields approached their lowest levels in a year. It cut Japanese debt by 853 billion yen, Japan’s Ministry of Finance said on Dec. 8.

Separately, the Japan Bank for International Cooperation, JGC Corp., Mizuho Corporate Bank Ltd., the Export-Import Bank of China and other Chinese companies will establish a $154 million fund to invest in environment-related businesses such as recycling and energy, the Japanese government said.

To contact the reporter on this story: Toru Fujioka in Tokyo at

To contact the editor responsible for this story: Paul Panckhurst at

China Market Wrap-20DEC2011

– Ping An Insurance (Group) Co of China <601318.SS> <2318.HK>, the world’s second-biggest life insurer by market value, said on Tuesday it plans to raise up to 26 billion yuan ($4.1 billion) by selling convertible bonds to replenish capital amid economic uncertainty.

– China’s HNA Group, which controls China’s fourth-largest carrier Hainan Airlines Co Ltd <600221.SS> and recently bought General Electric Co‘s <GE.N> container leasing unit for $1 billion, said on Tuesday that it will continue to invest in foreign projects next year, aiming for overseas assets to make up two-fifths of its total assets in 3-5 years.

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– China Telecom Corp Ltd <0728.HK>, the smallest of the country’s three telecommunications operators, said on Tuesday that its mobile subscribers increased to 123.39 million in November, including 33.35 million 3G subscribers.
– Shares of natural gas distributor China Gas Holdings Ltd <0384.HK> rose on Tuesday to HK$3.50, matching the offer price made jointly bySinopec <0386.HK> and ENN Energy Holdings Ltd <2688.HK>, putting pressure on the bidders to lift the price.
– Swire Properties Ltd <1972.HK> a spinoff of Swire Pacific Ltd<0019.HK>, said it had applied for a listing of its shares on the stock exchange by way of introduction and trading in the shares is expected to begin on Jan 18.

Japan to Buy $10Bln Worth of Chinese Bonds

A new major development in the Rise of the RMB as a new reserve currency…


Japan is likely to purchase 10 billion U.S. dollars worth of yuan-denominated bonds, under a proposed bilateral currency and financial agreement

Japan is likely to purchase 10 billion U.S. dollars worth of yuan-denominated bonds, under a proposed bilateral currency and financial agreement, the Nikkei business daily reported Tuesday.

Officials from the two parties are working out plans to have the pact signed when Japan Premier Yoshihiko Noda visits China on December 25 and 26.

As the core of the pact, the purchase will be carried out in stages through a special designed account, the report said.

It also said that Japan is looking to diversify its foreign exchange reserves, which currently focuses on the dollar investment. Tokyo also wants to tighten economic cooperation with China by supporting China’s efforts to internationalize the yuan.

Japan will also help foster an offshore market for yuan-denominated bond trading, according to the newspaper.

China issued 1.4 trillion yuan of government bonds in 2009, up 55 percent from the previous year. Thailand and Nigeria already hold Chinese government bonds.

The volume of yuan-denominated bonds have somehow expanded in Hong Kong recently, where overseas investors could purchase government bonds in the mainland, but controls including a cap of buying quota remain strict.


China Market Wrap-18DEC2011


– China Shenhua Group, the country’s largest coal producer and the parent of China Shenhua Energy Co Ltd <1088.HK> <601088.SS>, has started building a $21.4 billion facility to produce alumina from coal ash, the state Xinhua news agency said on Sunday, citing a senior company executive.

– CITIC Securities <6030.HK> <600030.SS>, China’s top brokerage, said regulatory approval for its $374 million deal to buy French bank Credit Agricole’s <CAGR.PA> stakes in brokerage brands CLSA and Cheuvreux would likely take longer than expected. .

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– China Datang Corp Renewable Power Co Ltd <1798.HK> expects a 50 percent rise in profits in 2011, the official Xinhua news agency said on Saturday, citing a senior company executive.
– A supply train fell off the tracks on a railway connecting UC RUSAL‘s <0486.HK> Friguia alumina refinery in Guinea with a port, a company official said on Sunday. He said the incident was not affecting the flow of supplies to the Friguia plant, which produces some 630,000 tonnes of alumina per year, and denied the plant had been shut.
– Chinese-owned container terminal operator ECT, which owned byHutchinson Whampoa <0013.HK> unit Hutchinson Port Holdings, has sued  Rotterdam port and asked for 900 million euros ($1.2 billion) compensation in a dispute over container operators due to open in the enlarged harbour in the coming years, the port said on Friday.
– Sands China Ltd <1928.HK> said Securities and Futures Commission of Hong Kong confirmed an investigation in relation to alleged breaches of the provisions of the Securities and Futures Ordinance had been concluded and that no further action would be taken against the company at this time.
– Dongjiang Environmental Co Ltd <0895.HK> said it proposed to issue up to 25 million A shares in Shenzhen, a deal to be subject to CSRC approval, raising about 440 million yuan to fund investment in waste treatment projects.

One Small Victory for Humankind-Another Dear Leader Bites the Dust

kim jong il team america

China Market Wrap-15DEC2011

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– China can tame inflation to less than 4 percent next year, while maintaining economic growth above 8 percent, Yu Bin, an economist for a state think tank said on Thursday, arguing that domestic consumption will help shore up GDP.

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– Richard Chandler Corp, the largest shareholder in Sino-Forest – the parent of Greenheart Group <0094.HK>, called on Thursday for a board shake-up, saying directors are taking too long to clear the China-focused forestry company of fraud allegations.

– Hong Kong Exchanges and Clearing Ltd (HKEx) <0388.HK>, among the world’s largest exchange operators, said it intended to expand futures trading offerings and hours in 2012, allowing investors to adjust positions outside regular trading hours.

– Russia’s United Company RUSAL Plc <0486.HK>, the world’s top aluminium producer, confirmed on Thursday that it has started discussions with creditors to adjust debt covenants due to possible continued weakness on commodity markets next year.

– Swire Properties, a unit of Swire Pacific <0019.HK>, will invest $230 million to temporarily take a majority stake in its joint venture project in Chengdu with Sino-Ocean Land <3377.HK>, the companies said Thursday.

– Chow Tai Fook Jewellery Group Ltd <1929.HK>, the world’s biggest jewellery retailer, and New China Life Insurance <1336.HK> both fell as much as 9 percent after the two companies raised a combined $3.9 billion. New China Life, which listed both in Hong Kong and Shanghai, will debut in mainland China on Friday.

– CITIC Securities Co Ltd <6030.HK> said China Securities Regulatory Commission had approved its plan to transfer 51 percent interest in China Asset Management Co Ltd to five investors and it retains a 49 percent stake of the asset management unit.said its commercial coal.

Dan Collins Interviewed on Wall Street for Main Street

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China Market Wrap- 12DEC2011

– Haitong Securities Co Ltd <600837.SS>, China’s No.2 brokerage by assets, said it had decided not to proceed with its offering in Hong Kong due to changes in market conditions and excessive volatility.

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– China Petroleum & Chemical Corp <0386.HK> and ENN Engery Holdings Ltd <2688.HK> said on Tuesday they would offer to acquire all outstanding shares in China Gas <0384.HK> for a maximum HK$16.7 billion ($2.15 billion) in cash.

– Cathay Pacific Airways Ltd <0293.HK>, Hong Kong’s dominant carrier, plans new economy class products to sustain passenger numbers in 2012 amid a volatile global economy, its Chief Executive said on Monday.

– Vale <VALE5.SA><6210.HK> may start operating an iron ore transshipment centre in the Philippines early next year, two years ahead of a similar facility in Malaysia, as the world’s top iron ore miner moves closer to its biggest market, China.

– Chinese carmaker Geely Automobile Holdings Ltd <0175.HK> said on Monday that November vehicle sales volume rose 0.8 percent from a year earlier.

– Nine Dragons Paper (Holdings) Ltd <2689.HK> said its indirect unit Dongguan Nine Dragons has completed the issue of 1.1 billion yuan worth of medium-term note in China.

China Market Wrap -07DEC2011

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– PetroChina has discovered shale gas trapped inside deposits of rock in China’s Sichuan province, the Financial Times reported on Wednesday.
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– Media mogul Run Run Shaw, the 104-year old chairman of Television Broadcasts Ltd (TVB), Hong Kong’s biggest TV operator, will retire as chairman at the end of this year, the company said on Wednesday.

– Brazilian iron ore miner Valesaid it would take time for its new mega-ships to be able to enter Chinese ports but stood by its shipping strategy.

– Singapore state investor Temasek Holdings [TEM.UL] is looking to raise up to S$600 million ($468 million) from the sale of zero coupon bonds exchangeable into shares of Hong Kong trading company Li & Fung Ltd, IFR reported on Wednesday.

– Melco Crown Entertainment Ltd, one of six licenced casino operators in Macau, the world’s largest gambling destination, expects revenue in the Chinese territory to reach $45 billion next year thanks to the resilience of China’s economy and a vast unpenetrated domestic market, Chief Executive Officer Lawrence Ho said on Wednesday.

– Chinese group Minmetals Resourcesextended its $1.3 billion takeover offer for Africa-focused Anvil Miningto Jan. 11, 2012, its second extension as it needs more time to resolve a dispute over contracts with Congo.

– China Pacific Insurance (Group) Co Ltdsaid China Insurance Regulatory Commission had approved its plan to issue up ot 8 billion yuan worth of subordinated term debts with maturity of 10 years.

– Nine Dragons Paper (Holdings) Ltdsaid its unit Dongguan Sea Dragon completed the issue of 1 billion yuan worth of short-term commercial paper in China, raising proceeds to repay existing bank borrowings and for working capital.

By Andy Xie

Fit to Burst21 Nov 2011

China’s property bubble is bursting. Prices may fall by as much as 25 per cent soon and by another similar amount in the following two to three years. This is a necessary step for China’s rebalancing. It shifts income from government to the household sector and lays the foundations for domestic demand-led growth in the coming decade. The short-term economic pain will be tolerable and a small price to pay for a better tomorrow.

On the other hand, if the government caves in to pressure and tries to revive the bubble by printing massive amounts of money, it could lead to hyperinflation, currency devaluation, and social and economic chaos.

For the first time, China’s per capita income surpassed US$5,000 this year. This is half of the global average and a fraction of the level of developed countries’. Chinese people are hard working and well educated, and the country has some of the best infrastructure in the world. Despite the weak global economy, as long as China doesn’t make a big mistake, per capita income could reach US$15,000 by, say, 2020. The biggest mistake that China could make is to allow the property bubble to grow.

The global environment is grim. Europe and Japan are in recession. The US may slide into recession next year amid political strife. The developed economies have lost competitiveness against the developing ones and must cut living standards to stabilise their finances.

While China’s exports may suffer in the weak global economy, it can compensate for the fall in sales by adding value to them. Chinese people can learn from the Germans and Japanese – namely, decrease imports and increase the value added to its US$2 trillion exports. Such changes would be sufficient to sustain China’s external balance for supporting a per capita income of US$15,000.

Over the past decade, China’s per capita income has increased by leaps and bounds. This is due to plain hard work, not brilliant leadership or some gift from the international community. Chinese people work much harder than virtually anyone else. China’s construction sites operate 24 hours a day, seven days a week, and are four times as efficient as infrastructure projects in the developed world. Chinese factories run easily twice as long per day as factories elsewhere. And Chinese workers are paid one-tenth of what their counterparts in the developed world get.

A property bubble and corruption, however, threaten China’s bright future. The two are linked. The government controls both land and the banks. It is responsible for stoking the bubble in order to increase government revenue. As government revenue has mushroomed, so has corruption. While the bubble threatens China’s economic stability, corruption threatens its social and political stability.

The central government has shown unusual determination to curb property speculation. Many argue that the market is down purely because of government action. This is half the truth. If the government hadn’t intervened, the market would have risen further, and the bubble would have eventually burst anyway. Government actions may have shaved a third off the speculative peak and lessened the pain of adjustment accordingly.

Some local governments and property developers warn that a bursting of the bubble would bring widespread bankruptcies, mass lay-offs and economic chaos. This is essentially a strategy of holding Beijing hostage to keep the bubble going. It worked before, but not this time.

Now is the last chance to burst the bubble without creating social chaos. China’s labour market is quite tight. Blue-collar labour is in demand everywhere. As the property market adjusts, some bankruptcies would lead to lay-offs. But the laid-off workers should be able to find alternative employment quickly. Further, bursting the bubble would mainly bring down prices, but not necessarily sales volumes. On the contrary, lower prices would increase sales volumes. Hence, construction work would rise, rather than fall.

Lower prices would decrease local government revenue, which would lead to less infrastructure investment. But the negative effect on demand would be offset by the beneficial impact on consumption, because lower housing prices would mean households have more to spend on other things.

The disruption from bankruptcies could be minimised by encouraging industry consolidation. Banks and local governments should move quickly to sell bankrupt developers to stronger players. Through this process, China’s property industry will become stronger.

Even if the central government were to revive the bubble, the required monetary growth would come on top of the expansion in 2009 when bank lending soared. China’s money supply is already vast, and massive increases on such a high base would lead to hyperinflation.

China has a bright future in this decade and beyond. The property bubble is the destructive factor that must be brought under control.

China Market Wrap-06DEC2011

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– China may raise soybean purchases in coming weeks as Chinese inventories remain low, Hamburg-based oilseeds analysts Oil World said on Tuesday.

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– Brazil’s Vale <VALE5.SA><VALE.N><6210.HK>, the world’s second-largest mining company, said on Tuesday its Port of Ponta da Madeira is operating normally after a damaged ore carrier, the world’s largest, was removed from one of its four berths.

– China Steel <2002.TW>, Taiwan’s top steelmaker, has agreed a 23 percent cut in iron ore prices for October-December with Brazilian minerVale <VALE5.SA>, as mills seek better contract terms after ore prices slumped and steel demand thinned.

– Dongfeng Motor Group Co <0489.HK> plans to set up a 55-45 percent manufacturing venture with Swedish truck maker Volvo <VOLVb.ST> in 2012, a Chinese newspaper said.

– Chinese offshore oil and gas specialist CNOOC Ltd <0883.HK> will drill its first deepsea exploration well in a northern area of the South China Sea in coming weeks, a company official told Reuters on Tuesday.

– Russia’s UC RUSAL <0486.HK> has surprised its lenders with a request for a covenant holiday on a $4.75 billion pre-export syndicated loan just nine weeks after the deal signed, banking sources close to the deal said.

– Standard Chartered <STAN.L><2888.HK> has agreed to buy more than half of Barclays’ <BARC.L> Indian credit card portfolio at a discount to its book value, two sources with direct knowledge of the matter said on Tuesday.

– Sales of Taiwanese smartphone maker HTC Corp <2498.TW> dropped 30 percent in November from a month before as the world’s No.4 smartphone brand struggled to compete against bigger rivals Apple <AAPL.O> and Samsung Electronics <005930.KS>.

China Market Wrap-05DEC2011

– Shares of Baoshan Iron & Steel Co Ltd <600019.SS>, China’s biggest listed steelmaker, have been put on a trading halt pending an announcement regarding an adjustment of some its assets, it said in a statement.

– China’s Pang Da Automobile Trade Co <601258.SS> said in a statement late on Monday that it would continue talks with various parties including Saab on plans to invest in the crisis-hit Swedish carmaker .

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– Britain’s financial regulator slapped a record 10.5 million pound ($16.4 million) fine on HSBC <HSBA.L> on Monday for mis-selling investments to pay care home costs for older customers.

– Tencent Holdings Ltd <0700.HK>, China’s biggest Internet company by revenue, is issuing five-year bonds worth at least $500 million in its first U.S. dollar-denominated debt issue to help fund short-term borrowings, sources said on Monday.

– Fashion retailer Esprit Holdings Ltd <0330.HK> said on Monday that executive director and chief financial officer Chew Fook Aun has decided to resign on or before June 1, 2012, and the company is confident it will find a replacement.

– China Petroleum & Chemical Corp, or Sinopec Corp <0386.HK>, plans a one-month regular maintenance at a 160,000 barrel-per-day crude unit operated at its Qilu plant in the summer of 2012. That will trim the total crude throughput at the Qilu refinery by about 400,000 tonnes, or about 4 percent, to 10.1 million tonnes for next year, or 202,000 bpd, an official said.

– Hang Lung Properties Ltd <0101.HK>, Hong Kong’s third most valuable developer, said it aims to use the downturn in China’s property market to increase its land bank in second-tier cities.

– Guangdong Investment Ltd <0270.HK>, which Guangdong government has granted it the right to supply water to Hong Kong, said annual water purchase by the city for the three years 2012, 2013 and 2014 are HK$3.54 billion, HK$3.74 billion and HK$3.96 billion respectively, compared with HK$3.34 billion in 2011. It said any increase in water tariff should have a positive impact on its revenue.

– Huaneng Power International, Inc. <0902.HK> announced tariff adjustment of its power plants effective December 1. Upon adjustments on the on-grid electricity tariffs, the weighted average on-grid electricity tariffs for capacities of its generating units with tariff adjustments for 2012 will increase by 28.8 yuan/MWh.

– China Power New Energy Development Co Ltd <0735.HK> said it had adjusted the on-grid tariffs of some of its power plants by 25-40 yuan/MWh effective December 1.

• Markets events

– Sitoy Group Holdings Ltd <1023.HK> trading debut
– Dongjing Environmental Co Ltd <0895.HK> EGM in Shenzhen
– EC-Founder (Holdings) Co Ltd <0618.HK> SGM
– Founder Holdings Ltd <0418.HK> SGM
– Inspur International Ltd <0596.HK> EGM
– Jiangxi Copper Co Ltd <0358.HK> EGM in China
– Sandmartin International Holdings Ltd <0482.HK> AGM
– U-Right International Holdings Ltd <0627.H

The Black Swan of Cairo and the Illusion of Control

Very good reading on why man cannot save the economy.

Complex systems that have artificially suppressed volatility tend to become extremely fragile, while at the same time exhibiting no visible risks. In fact, they tend to be too calm and exhibit minimal variability as silent risks accumulate beneath the surface.

Such environments eventually experience massive blowups, catching everyone of-guard and undoing years of stability or, in some cases, ending up far worse than they were in their initial volatile state.

But alongside the “catalysts as causes” confusion sit two mental biases: the illusion of control and the action bias (the illusion that doing something is always better than doing nothing). This leads to the desire to impose man-made solutions.



Gold Jewelry Demand in China to Double in a Decade

By Yang Xi

China’s demand for gold jewelry is expected to double over the next decade as Chinese incomes continue to grow, Albert Cheng, a managing director of the World Gold Council, told the China Business Daily Thursday

The world’s second largest gold jewelry consumer, China’s consumption will hit 550 tons this year, Cheng said.

The country’s demand for gold jewelry in the third quarter increased by 13 percent from a year before to 131.0 tons, according to a report released by the WGC. Meanwhile, the price of gold hit a record $1,920.30 an ounce in the third quarter, largely due to investor worries over the eurozone debt crisis and U.S. economic sluggishness.

China Market Wrap-01DEC2012

Shanghai’s stock index closed up 2.3 percent at 2,386.9 points on Thursday, posting the biggest percentage rise in 5 weeks and with banking stocks up sharply, after the central bank announced a cut in banks’ reserve requirement ratios (RRR).
Hong Kong shares closed up 5.63 percent at 19,002.26 points, surging in robust volume after Beijing signalled a policy shift late on Wednesday with its first RRR cut in three years.

• A-shares
– Baosteel Group Corporation, the parent of China’s Baoshan Iron & Steel<600019.SS>, was the seller in a $267 million sale of China Construction Bank Corp <0939.HK> shares earlier this week, two sources with direct knowledge of the transaction told Reuters on Thursday.

– Agricultural Bank of China Ltd <601288.SS><1288.HK> said its Agricultural Bank of China (UK) Ltd and Seoul Branch of the bank have been granted their business licenses by the regulatory authorities in their respective jurisdictions.

– China’s big four state banks extended 140 billion yuan ($22.00 billion) in new loans in the first 28 days of November, far under market expectations and October’s full-month amount of 240 billion yuan, the official China Securities Journal reported on Friday .

• H-shares

– Tough regulations will curb Standard Chartered Plc‘s <STAN.L><2888.HK> profitability in the next two or three years but should help pave the way for “remarkable” medium-term growth as European rivals retreat from Asia, its finance boss told Reuters.
– U.S. luxury handbag maker Coach Inc <COH.N><6388.HK>  dropped in its trading debut in Hong Kong on Thursday as thin volume in its depositary receipts limited their appeal to local investors.

– Sands China Ltd <1928.HK>, Wynn Macau Ltd <1128.HK> and MGM China Holdings Ltd <2282.HK> are seen to be in focus after Macau, the world’s largest gambling destination, posted a 32.9 percent rise in November gaming revenue to 23 billion patacas ($2.9 billion), buoyed by a rising tide of Chinese gamblers to the glitzy enclave, despite deep-set global economic uncertainties.

– The world’s top aluminium producer UC RUSAL <0486.HK> said on Thursday it had finished redesigning its Volkhov smelter, Russia’s first aluminium plant, built in 1932, raising its annual capacity to 32,000 tonnes from 24,000 tonnes.

 A shareholder is selling 50 million shares of Belle International Holdings <1880.HK> at a range of HK$14.30-HK$14.60 per share, or 4.1 to 6 percent discount to the previous close. for about $93 million, Morgan Stanley is the sole bookrunner of the deal, according to a term sheet obtained by Reuters.

– CSR Corporation Ltd <1766.HK> said it had entered into several major contracts with parties including Ministry of Railways, China Shenhua Energy Co Ltd, China Railway Container Company, Mongolian People’s Republic and UAE Union Railway Company, with an aggregate value of about 5.87 billion yuan.

– Huadian Power International Corporation Ltd <1071.HK> said the weighted average on-grid tariff of the units under the company would be adjusted upward by about RMB2.68 cents/KWH, in a bid to alleviate the impact of coal price increase on the cost of power generation, and the adjusted tariff would come into effect on December 1.