TRANSCRIPT: Analysis of Chinese stock markets,
the 18th US-China Joint Commission on Commerce
and Trade, the 3rd Strategic Economic Dialog,
is the China IPO fever cooling? and more...
Sinomania! Volume I Webisode 42, December 10,
Beijing Gives Wall Street A Present!
Markets Recover Again …
And Is China's IPO Train Running Out of Track?
The Shanghai Composite Index closed December
10 at 5,161.919 and appears for the moment to
be happy around 5,000. The CSI 300 has recovered
most of the loss over the past month and closed
today at 5,133.56. Shanghai B shares are trending
up and back where they were a month ago closing
today at 361.625. ShenZhen Bs closed Monday at
720.287 after rising dramatically since our last
episode and are back to last month's levels.
Ahead of this week's summits with American officials,
the Yuan is up but few serious analysts believe
Beijing will alter its gradual appreciation strategy.
Morgan Stanley economists are calling for the
Yuan to reach no more than 6.80 to the dollar
by the end of next year.
Meanwhile the impact of the so-called "Sub-Prime
Crisis" on China remains unknown. The economy
continues hot - November money supply grew 18
and a half percent and inflation was up 6.9 percent
in the same period the highest yet this year and
a big worry for Beijing.
The world's regulators, bankers, investors, journalists,
and comedy writers have yet to decide whether
the current state of affairs is more 1991 or 1998?
Is it recession or credit event? Signs seem to
point to recession - in the United States. The
impact this will have next year on China, US-China
relations, the race for the Presidency, and investor
confidence will be important to watch.
SUMMIT IN BEIJING
The 18th US-China Joint Commission on Commerce
and Trade opened December 11 in Beijing and will
be followed by the third Strategic Economic Dialogue,
high-level talks that will bring Treasury Secretary
Henry Paulson and Vice Premier Wu Yi together
again along with big delegations on both sides.
The US-China Joint Commission on Commerce and
Trade is a little known but important body that
addresses trade and market access. It's meeting
will be presided over on the US side by US Trade
Representative Susan Schwab and Commerce Secretary
Carlos Gutierrez. I was in Washington, DC, last
week trying to find out if there will be discussion
on China's progress toward joining the WTO Government
Procurement Agreement. A year ago, Beijing pledged
to enter discussions and reveal its first level
market access for government procurement opportunities
by December 2007.
The WTO Government Procurement protocol is a
potentially huge opportunity for US exporters
and Washington is in a position to exert real
pressure on Beijing after six years of WTO membership
to open its government procurement. But it appears
that the meeting will address issues from last
year's summit such as getting China to buy American
beef. Unfortunately, word from Beijing today is
that the commission is using its time on more
politically useful and newsy topics such as intellectual
property and food and toy safety.
Ahead of the Strategic Economic Dialogue that
follows this week, Beijing gave Wall Street a
holiday present and specifically answered one
of the demands from China currency warmongers
in the US Senate. The Chinese State Administration
for Foreign Exchange tripled the amount that US
institutional investors can put into Chinese stock
markets to $30 billion US dollars a year -- Another
indication that money will continue flowing into
Shanghai. And it's a sign of favoritism toward
the United States as the recent EU-China summit
ended with no concessions.
There's more: Beijing will allow Morgan Stanley
and Credit Suisse to set up investment banking
businesses in China although it is unclear whether
they will be allowed to actually trade domestic
Chinese stocks or be limited to underwriting IPOs.
A note on this week's US-China summits: they
will mark the final official participation by
Wu Yi, called China's most powerful woman, as
she has reached retirement age and will step down
next March when the National People's Congress
ratifies China's new government.
According to The
Standard, English language newspaper in
Hong Kong, IPO passion in China is "spent." High
profile investor Lee Shau-Kee of Hong Kong says
prices are too high, Thomson Financial says hedge
fund managers think China may be "too risky,"
and there is talk of IPO cancellations and valuations
But so far signs are 2007 will be remembered
as the year of the Chinese IPO. To date there
have been 203 Chinese listings valued at over
$88 billion US dollars. Ninety-eight of the IPOs
were on foreign markets.
Of foreign listings Hong Kong got the bulk of
business but the New York Stock Exchange had 14
Chinese IPOs valued at almost $4 billion US dollars
as of November, eleven percent of overseas Chinese
New York City Mayor Michael Bloomberg is in Beijing
along with the New York Stock Exchange president
to cut the ribbon on the exchange's new Beijing
office this week.
And new share offerings keep coming. Here are
a few interesting ones to look out for:
VanceInfo Technologies, formerly WorkSoft,
a Beijing based IT service provider and offshore
software developer, will IPO on the New York Stock
Exchange with symbol VIT, selling over
seven million American Depositary Shares at a
1 to 1 ratio, priced at $7.50 to $9.50 US dollars.
Another American Depositary Share offer, this
time on NASDAQ with symbol ADTV, is CGEN
Digital Media Network, an in-store TV advertising
network that features slick ads on big flat screen
TVs inside China's growing number of big department
and specialty stores. Each ADR will represent
20 ordinary shares and be priced at $13 to $15
On Chinese markets, China Pacific Insurance
will IPO on Shanghai and then Hong Kong. China
Pacific is the third largest insurance company
in China and partly owned by the American private
equity fund, the Carlyle Group. No other details
at this time.
Rural Commercial Bank of Zhangjiagang
of Jiangsu Province will IPO in Shanghai, the
first rural Chinese bank to win approval for an
IPO. I have no other details on that one.