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Volume I, Episode 23
July 10, 2007
Chinese markets confused? Big IPOs - Chery+Chrysler

June 27, 2007

COSCO - China Mobile - IPOs - Telecom Mergers & Acquisitions

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 New 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!

Chinese markets confused but why? More big new IPOs and Chery+Chrysler at last:
Sinomania! Volume I Episode 23, July 10, 2007

Chinese markets are confused but why? More big new IPOs coming; And Chery and Chrysler finally tie the knot!


At a splashy signing ceremony last Wednesday in Beijing, Chery Automobiles and Chrysler formally - and finally - hitched wagons in a deal that has America's auto industry in a tailspin. Chery President Yin Tongyue indicated that Chrysler will soon sell a Chery small car in the US for only $7,000 US dollars. Chrysler Chairman Tom LaSorda has neither confirmed nor commented on pricing but has said that Chrysler will sell Chery made cars in Latin America next year and North America starting in 2009.

Nine out of ten Chrysler vehicle sales are in North America so the company now owned by private equity firm Cerberus Capital is eyeing exports of Chery autos under a Chrysler brand such as Dodge or Jeep to capture markets in Europe and Asia.

In a related note, Fiat and Nanjing Auto may or may not be dissolving their troubled joint venture. Fiat denies a cash infusion claimed in the Chinese press. Nanjing Auto bought the British MG Rover company two years ago but its Fiat partnership has faltered.

Ford and GM are racing to meet the new Chinese competition but neither will have a vehicles ready until 2010. And remember Chery is just one of many Chinese auto companies positioning for the United States market.

Return of the market Yo-Yo?

Chinese markets are up slightly as the week begins almost recovering the losses from the sharp sell-off of last week. The Shanghai Composite closed July 9 at 3,883.216 gaining just under three percent and the news is the same across all major indexes.

Speculation is that last Wednesday's more than five percent drop of the Shanghai composite down to just above 3,600, was due to worry over the spate of big new IPO share issues expected soon and the delayed impact of the tripling of the stamp transaction tax.

Many pundits believe that Chinese regulators may have successfully cooled the market and point in particular to the big decline in turnover volume which is running around one third the level of the May peak and new share holding accounts are also down to about one third previous levels.

I believe last week's drop was probably due to three key events that happened in the first part of the week:

On July second the National Bureau of Statistics released a macro report that indicated overheating in industrial production and in disposable income figures for April and May. The disposable income figures are important since many analysts inside and outside China believe that excess cash and few investment options are feeding the Chinese bull market.

Wednesday, the third annual EU-China financial summit convened in Brussels and the Chinese delegation specifically emphasized the need and determination to maintain a tight monetary policy.

The summit was ignored by the American press but revealed progress in Chinese -European cooperation in accounting and auditing standards and progress toward Chinese acceptance into the WTO's government procurement agreement. The EU and China also reiterated their desire for further convergence in monetary policy - that could spell trouble for the dollar in the long term.

Also on July 4, a day before the stock price correction, the head of China's National Development and Reform Commission, Ma Kai, said in a speech before a session of the Chinese People's Political Consultative Conference standing committee, that China had failed to contain the risks of rampant growth and the country was overheating. Ma's comment alone was probably enough to cause nervous investors to start selling.

The Chinese People's Consultative Conference or CPCC is one of the top advisory boards to China's congress and, more importantly, the State Council that runs China's day-to-day government. As it concluded it's session July 7, it called for China to issue national treasury bonds to cover the growing debt of Chinese public universities and to focus on energy efficiency as a top national priority.


Chinese regulators continue to encourage big state-owned firms to partially privatize and list on domestic exchanges. At a confab in Beijing over the weekend Qi Bin, a director at the China Securities Regulatory Commission, said the agency will speed up the process for A share IPOs and continue to push H share firms in Hong Kong to list on the mainland.

An acceleration of IPOs remains expected for this month and next and include PetroChina, mentioned in a previous episode, that could raise $6 billion US dollars, China Construction Bank, China Mobile, both mentioned before here, and ShenHua Energy, China's biggest coal miner, planning a Shanghai IPO that could raise $6.3 billion US dollars. ShenHua is already listed as a Hong Kong H Share.

Another coal giant with IPO plans is Yongcheng Coal & Electricity Group of central Henan province that is looking to raise up to $1.3 billion US dollars with a dual Hong Kong and Shanghai listing later this year.

But perhaps the most exciting opportunity is the announced IPO of a unit of China Aviation Industry Corp I or AVIC I, a giant conglomerate in China's fast developing aviation industry. Citibank was chosen as advisor for an overseas IPO of AVIC I's Commercial Aircraft Company Ltd. that will include the assets of AVIC's Shanghai commercial jet manufacturing operations. AVIC I is restructuring and may list other units.

It now seems certain that 2007 will be the Year of the Chinese IPO. A report last week from PriceWaterhouseCoopers says that China is on pace to raise $52 billion from new share listings on its domestic exchanges this year making it the world's leader. Competition will no doubt increase between Hong Kong, New York, London, and other exchanges to retain Chinese business.

And interest in Chinese shares remains hot. For example, the Hong Kong IPO of Vinda International Holdings, China's leading toilet and sanitary paper manufacturer, was 114 times oversubscribed the company reported last week.

Finally, in the wake of all the reports about the slave labor camp uncovered at a brick works in central China - exposed not by western media but by a local Chinese television station in Henan province - China's Congress passed last week a labor reform law that will require written contracts for all employees, restrictions on the use of temporary laborers and allow collective bargaining by China's state-controlled unions. The new law takes effect January 1.

I'll see you next time!

© Sinomania! 2007 All Rights Reserved.

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