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Volume I, Episode 21
June 21, 2007
New Record Highs in Hong Kong, Shanghai: Will Beijing Put On the Squeeze? - IPOs & more

June 15, 2007

Fundamental Misalignment: US-China currency war - stock markets up & IPOs

June 7, 2007

China Stock Pop - Hot News items - climate change, tainted food...

May 31, 2007

Chinese stock markets hiccup - IPOs - USA-China Trade Gap

May 25, 2007

Report on the 2nd USA/China Strategic Economic Dialogue: Win-Win or When-When? - Market numbers - New IPOs

May 18, 2007

New life for Hong Kong? IPO Update - USA/China summit

May 11, 2007

Will Shanghai end up like NASDAQ or Nikkei? - IPOs

April 30, 2007

Tulips to Dotcom - is Sino Mania the next big bubble?

April 20, 2007

The Heat is on! - IPO Report - Air Pollution in China

April 15, 2007

China markets, IPO update, Beijing Ready for Olympics?

March 30, 2007

China markets up, up, up! Sinomania! goes to China

March 23, 2007

Focus on National People's Congress... Hi-Tech, IPOs

March 17, 2007

China's new investment strategy, IPOs, the Wrap...

March 7, 2007

China syndrome or hong bao bounce? New IPOs... more!

February 27, 2007

China Stock Market Yo-Yo, new IPO issues, the wrap

February 17, 2007

Chinese Year edition! Will China buy Chrysler & more!

February 9, 2007

The USA-China WTO trade dispute and New IPOs

February 1, 2007

IPOs: New Red Chip — Bubble Burst? — USA-China

January 26, 2007

BUBBLE TROUBLE? — IPOs on NASDAQ — Renminbi Yuan

January 20, 2007

IPOs in 3 hot sectors — BAOSteel — Macro Report

HKEX Hang Seng Shanghai
SSE Shanghai Hong Kong
SZEX Shenzhen Beijing
MUSIC in China: Listen!

Beijing Puts On The Squeeze?: Sinomania! Volume I Episode 21, June 21, 2007

Records are smashed in Hong Kong and Shanghai but will Beijing squeeze the market?
A massive new IPO in China’s hot energy sector;
And US-China superpower summits continue, this time behind closed doors.


Hong Kong H-shares reached an all-time high June 21 closing at 2,207.97 and the Hang Seng index briefly smashed a record just shy of 22,000 points to close at 21,954.67 on June 21st. Speculation is surging that Hong Kong may catch sinomania after July 5 when new rules from China’s Securities Regulatory Commission will allow mainland brokerages and funds to invest in Hong Kong markets including bonds and futures. For now Hong Kong will be the only area outside the mainland where domestic Chinese securities firms can invest their expanding cash.

Markets on the mainland have recovered all recently lost ground and are again flirting with new highs. The Shanghai Composite closed at 4,230.82 on June 21 only about 100 points below its record peak. And the CSI 300 index -- one of the world’s biggest gainers this year -- which is made up of a mix of the best performing A share companies on the Shanghai and Shenzhen exchanges, reached a new record on June 19 but closed down slightly on June 21 at 4,197.28.

But indications are that Beijing is taking seriously the views of many economists that China is too hot and the money supply growing way to fast. At a meeting late last week of China’s State Council -- the congress and cabinet in miniature that runs the day-to-day central government -- Premier or Prime Minister Wen Jiabao said that new big investment projects will be stalled and that China’s monetary policy needed to be “appropriately tight.”

What measure will be used to create the appropriate tightness of Chinese money is uncertain but most China-watchers believe it will be in the form of tax reform on two counts: One is the elimination of export tax rebates on nearly all export categories including areas that China dominates globally such as apparel, shoes, and toys. The second is the elimination of tax on interest earned on bank deposits which will in effect raise deposit rates, and cause a possible increase in lending rates.

Beijing’s hope is that Chinese exports will slow enough to stave off trade wars particularly in the USA although that effort will not appease, in my view, a US Congress hell bent on making China America’s scapegoat. The other actions are designed to tighten money in China without appreciating the Renminbi, China’s currency, more than the 4-6 percent currently planned for this year.

Whether these efforts will be successful is anyone’s guess. Beijing now seems convinced that Chinese markets are headed for a crash – a prediction, as regular viewers know, anticipated by the outside world from the start of the year. But the Chinese people think otherwise and reports are that Chinese are forgoing spending on big consumer durables in order to put cash in the stock market. I still believe my projection that the Shanghai Composite will reach 4,600 by 2008. But as always, stay tuned!


PetroChina, China’s oil major now ranked as the 4th biggest company in the world in market value and a major challenger to traditional powerhouses Exxon/Mobile, Royal Dutch Shell, and British Petroleum, announced on June 20 that it will IPO on the Shanghai exchange as a domestic A share. The offering has not been priced and will be discussed at PetroChina’s shareholders meeting August 10 before submitting application to China’s securities regulator. The domestic listing could raise up to $6 billion US dollars making it the biggest Chinese IPO so far this year.

PetroChina is already listed as an H Share on Hong Kong and listed on the New York Stock Exchange under symbol PTR. In New York, PTR was up almost 3.5% June 21 to $152 dollars and 5 cents a share.

There is an active campaign by the “Darfur genocide” crowd to dump PetroChina shares because the company is the most active foreign oil producer in Sudan. But one of the most famous American investors, Warren Buffett, said at his company’s annual meeting this year that he has “no problem with what PetroChina is doing.” Buffett’s company, Berkshire Hathaway voted to keep its shares of PetroChina and ignore the coalition of aging Hollywood and music stars that are trying to blame China for sectarian atrocities in Sudan while ignoring the impact their own countries oil companies have on the situations in Nigeria, Guinea, or the middle east.

And speaking of big American investors, Microsoft announced that it will buy a significant stake in a Chinese television manufacturer, Sichuan ChangHong electric. The investment is to fund a joint project to develop TVs that will connect to computers and the internet, according to Microsoft.


The US State Department kicked off two days of talks with China on Wednesday, part of a “senior dialogue” that is conducted behind closed doors and supposed to touch on a broad range of issues. The State Department is giving no specifics but you can see the start of the talks in a video clip posted at the Sinomania! China News page.

My speculation is that the talks will center on competing energy interests and ascertaining where China is in oil and gas development in the Sudan and Iran while China will gauge US progress in the southern oil fields of Iraq and with Caspian Sea pipelines.

The talks take place as Iraq’s Kurdish President Talabani visits Beijing and Admiral Fallon, the new head of the US central command or CENTCOM, travels to Turkmenistan to meet with the new Turkmen president.

I’ll see you next time!

© Sinomania! 2007 All Rights Reserved.

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