TRANSCRIPT: Chinese Stock Indexes Stay Up; Big
Bond Sale for China's New Sovereign Wealth Fund;
IPOs; and Speculation on the Upcoming Party Congress
Sinomania! Volume I Webisode 30, August 30, 2007
Hu Cleans House but For Whom?
Beijing Sells Bonds;
And more IPOs!
MAJOR INDEXES UP
The Shanghai Composite index has gained over
700 points so far this month. It's been above
5,000 since August 23 and reached a record high
Tuesday at 5,195. So far this week the index is
up slightly overall and closed at 5167.884 today.
The CSI 300 surge continues. The index is above
5,000 for a week, back up today to close at 5241.228.
Shanghai B shares gained near three percent August
30 closing at 322.23. Shanghai Bs are getting
close to recovering the ground lost since the
beginning of August.
ShenZhen B shares show much the same pattern
with the index recovering from the slide that
began last Friday to close August 30 at 737.812.
In Hong Kong the Hang Seng index is in a sustained
rise since August 20 when the State Administration
of Foreign Exchange allowed direct investment
in the Hong Kong market by retail investors in
mainland China who will not be subject to the
annual cap currently around $50,000 US dollars
imposed on Chinese residents. In my view, this
means Hong Kong could be in the early stages of
a major rally and the Hang Seng could stay above
20,000 for a while. The Hang Seng index marked
a record high August 27 and closed Thursday at
BEIJING SELLS BONDS
The Chinese Ministry of Finance will sell 600
billion Yuan (around $79 billion US dollars) worth
of bonds to finance the new sovereign wealth fund
that will diversify China's massive foreign exchange
reserves away from US Treasury securities. The
new investment group will be larger than Singapore's
Temasek, a model of sorts for sovereign wealth
funds, and could soon rival Norway's big government
pension fund that invests Norway's petrodollars.
The bonds will be gradually sold so not to upset
China's poorly performing government bond market
which has anticipated the debt sale for some time.
Sovereign wealth funds will be one of the most
important players in financial markets in years
to come according to Morgan Stanley economists
and there is already a growing suspicion of these
state-controlled investment houses. China's investments
into the Blackstone Group and Barclay's Bank was
a hot topic and the subject of earlier episodes.
According to the German edition of the Financial
Times, on a state visit to China this week German
Chancellor Angela Merkel was told by Chinese officials
that China's sovereign wealth fund was interested
only in financial investments, a statement prompted
by the German government's concern of possible
Chinese takeover of heavily protected German industries.
An update on our report on Alibaba, China's biggest
ecommerce firm - the IPO of its business-to-business
assets is on and set for the Hong Kong exchange.
The debut could raise a billion US dollars and
start trading as early as September.
Here's an opportunity in China's dynamic and
lucrative energy sector - Anton Oilfield Services
of Beijing, which sells drilling equipment to
Chinese oil majors, hopes to raise up to $150
million US dollars with a IPO in Hong Kong sometime
early 2008. So watch for that one!
Finally, China's third largest airline, China
Eastern, is close to selling a major stake to
Singapore Airlines. The company has not recovered
from losses during the SARS crisis and is unprofitable.
Its shares traded on the New York Stock Exchange
under symbol CEA until May 21 when an undisclosed
"major problem" forced a suspension. At its frozen
price, Singapore Airlines may get a bargain for
an airline with excellent routes and a fleet of
new Airbus and Boeing planes.
HU CLEANS HOUSE?
There is a renewed call to accelerate financial
reforms by President Hu Jintao. Hu wants financial
policy to be used in a 'more efficient way' as
macoeconomic controls over China's red hot economy.
Yesterday's surprise resignation of Finance Minister
Jin Renqing may be a sign of bolder financial
changes to come.
The press in Hong Kong and much of the world
says comrade Jin was sacked because he had a mistress
and is part of new purge of old Jiang Zemin cronies
in anticipation of the 17th National Congress
of the Communist Party of China that will convene
October 15 in Beijing.
But Jin Renqing had a long and distinguished
career and kept a remarkably low profile. He is
not purged from the party. On the contrary, Jin
will now head the Development Research Center
of the State Council a policy position of some
influence. It is true Jin was elevated to Finance
Ministry senior management under former President
Jiang Zemin but he is 63 and since most government
positions in China have a mandatory retirement
age of 65 he could not serve another full term.
The 17th party congress will be one to watch
closely. President Hu does not currently have
an apparent protege to take over when his presidency
ends. There will be a lot of jockeying among Beijing
Mandarins and rumours are a woman may emerge in
the top power circles.