TRANSCRIPT: Shanghai stocks fall,
special comment on Davos 2008, and introducing
this week's Alpha Bet for China stocks...
Sinomania! Volume II Webisode 46, January 29,
2008
Shanghai Falls!
But is it a Bear Market or Correction?
Introducing the weekly Alpha Bet.
And a look at this year's Davos summit…
DAVOS 2008
The annual self-styled World Economic
Forum concluded yesterday in Davos, Switzerland,
with celebrity sightings and lugubrious laments
about the state of globalization. The world's
political and business elites agree that it's
the East's turn to keep the world in the black,
particularly China and India. There was some lofty
talk about re-igniting the stalled Doha round
of world trade negotiations but ultimately no
real action was taken.
The Davos event underscores the
great conundrum of globalization. On one hand
rich and powerful citizens from all corners of
the globe see the solution to the world's problems
in cooperation and unity. After all, capital knows
no border. But the current age is marked by fierce
nationalism and military build up. This opposition
prevents real integration from occurring and how
globalization can go much further, equalizing
currencies, for example, or justly sharing the
planet's natural resources, is uncertain.
SHANGHAI FALLS
Since January 14 Chinese shares
have been hammered. The Shanghai Composite Index
is down about 16% from the start of the year and
closed January 28 at 4,419.29 a seven percent
drop to the level last seen at the beginning of
August 2007.
The news is the same for all Chinese
stocks. The CSI 300 Index closed today at 4,731.883
a loss of almost seven percent. Shanghai B shares
closed at 304.853, over a five percent decline,
and are now back where they were last August.
ShenZhen Bs were down almost five percent January
28 to close at 625.60 back to the bottom of last
summer's trough after the tripling of the stamp
tax.
As I speak there is a very modest
recovery, around one to two percent across East
Asia but no rally.
So are we in the middle of the long
anticipated "correction" or the start of a new
Bear Market? It is hard to say. Remember volatility
is the rule in emerging markets and all four of
my predictions for Shanghai this year warn of
volatility and the possibility of severe price
drops.
News over the past two weeks has
not been good. Bank of China shares were suspended
in Shanghai after the bank, China's second biggest
lender, revealed serious losses in so-called subprime
investment exposure. Chinese mutual funds suffered
losses of around ten billion US dollars in the
last months of 2007. And don't forget what I call
the "hong bao" effect - the impact on Chinese
stockmarkets from profit taking around the Chinese
New Year holidays.
And speaking of Chinese New Year,
the world's largest migration of humans is underway
with an estimated 179 million people returning
home and visiting family all over China. The annual
event overwhelms transportation in the country
but this year it verges on travel chaos: record-breaking
snow storms are dumping snow from Xi'An to Shanghai
and falling on parts of China that normally see
little winter weather. In the southwest sleet
and ice have damaged power transmission. The China
Southern Power Grid Corporation is particularly
affected and power has been cut for all but essential
uses in Guizhou, Guangdong, and many other areas.
The weather and power disruption
is exacerbated by the coal shortage in China and
priority given to transporting coal over China's
railways is leaving hundreds of thousands of poorer
Chinese stranded at train stations.
China Southern Power Grid Corp.
is the ninth largest company in China and ranked
237 last year in Fortune magazine's global 500.
The Guangzhou based company made about $28 billion
US dollars in revenue last year and is long rumored
to be planning an IPO on an overseas exchange
but I can find no concrete details at this time.
THIS WEEK'S ALPHA BET
And now introducing a new feature
on the Sinomania! show - the weekly Alpha Bet!
This week's Alpha Bet starts with
ATAI for ATA Inc., China's biggest computer
based testing and education software producer,
listing on the NASDAQ global market sometime this
week. The company plans about five million American
Depositary Shares priced between $9.50 to $11.50
US dollars.
Next we have BCDS which stands
for BCD Semiconductor Manufacturing Limited soon
to IPO on NASDAQ. BCDS plans to sell six million
American Depositary Shares in the $9 to $11 US
dollar range. The Shanghai based company, founded
in 2000, supplies devices to major electronics
conglomerates including LG, Samsung, Sony, and
FoxConn.
SOL stands for ReneSola,
a solar wafer technology firm that sold ten million
ADRs on the New York Stock Exchange today for
$13 US dollars each. The company already trades
as a L share on London's Alternative Investment
Market. It begins trading in New York tomorrow.
No letters yet but another solar
wafer tech firm, Qiangsheng Photovoltaic Technology,
out of Hong Kong, plans a $250 million dollar
IPO on NASDAQ sometime this year. The company
is in trial production of thin-film amorphous
silicon solar cells and is looking to expand.
