TRANSCRIPT: Hong Kong, Shanghai
stocks battered, macro effects and analyst opinions
of the winter storms, IPOs on the ASX, Happy Chinese
New Year wish...
Sinomania! Volume II Webisode 47, February 6,
2008
Hang Seng Plunge!
The Blizzard of ’08 Hits China’s Economy.
This Week’s Alpha Bet.
And Happy New Year!
MARKETS YO-YO
Hong Kong stock markets plunged
with the benchmark Hang Seng Index down almost
five and a half percent and the China Enterprise
Index down nearly seven percent on February 5th.
The Shanghai Composite rose over
eight percent on Monday but closed down February
5 at 4,599.70 and seems stuck at the point (4,600)
that I predicted it would begin this year. The
CSI 300 Index, the global darling of 2007, is
trying to hold value around 5,000 and closed February
5 at 4,921.87. Shanghai B shares appear unable
to move and ended down to close at 317.71. ShenZhen
B shares struggle to maintain a baseline at 700
and closed down at 674 on February 5th.
The yo-yo effect of the market appears
consistent with my predictions that 2008 will
see greater volatility as a rule.
Taiwan shares though were up one
to two percent on Tuesday. I’ll have a lot more
to say about Taiwan shares in the weeks ahead.
Remember, stock markets in greater
China including Hong Kong, Taiwan, and South Korea
will be closed the rest of the week for the Chinese
New Year holidays.
MACRO REPORT
The impact of the cold snap and
snowstorms across central and southern China is
being felt in the national economy and in tourism
and retail sales in particular. A lot is being
read into the giant crowds of unhappy holiday
travelers and some sources are comparing current
events to the SARS crisis in 2003 expecting major
policy changes and political upheavals. I believe
this is over reaction and typical of the aloof
reporting on China that comes from the pages of
the Economist magazine or the New York Times.
After all the impact on GDP growth of the storms
is estimated at just over two tenths of one percent,
equivalent to a big oil price shock in the USA
for example, not enough to do real damage to the
economy.
Morgan Stanley’s chief China economist
Qing Wang in Hong Kong believes Beijing will ease
macro controls this year to compensate for slowing
exports, thanks to recession in the US, Europe,
and Japan, and effects of this year’s big natural
disaster. Specifically, Morgan Stanley’s call
is for no rate hikes from the Chinese central
bank (the People’s Bank of China) and toleration
for expanding money supply. Expectations are that
Beijing will resort to its usual blunt policy
response if growth slows – government financing
of big capital investments such as infrastructure
projects. The current wisdom is Beijing cannot
abide growth under 10%. The World Bank just revised
its forecast for 2008 to 9.6%.
One aspect of China’s situation
that is expected and accepted is continued inflation.
Food inflation is predicted up as the winter storms
have affected agriculture across China and the
prices for such staples as fresh vegetables are
already rising. A flip side, the Yuan should appreciate
even faster this year, some analysts say perhaps
as much as nine percent over the US dollar.
Because of the uncertainties in
the direction of China’s economy many analysts
predict that Beijing will not ease capital controls
and the individual retail investor program for
Hong Kong and index futures trading will be delayed.
But China Securities Regulatory
Commission just gave the go ahead to two new closed-end
mutual funds from China Southern Fund Management
Company and CCB Principal Asset Management Company.
These are the first stock funds approved since
the freeze put in place after last summer’s surge
in the stock markets. I believe Beijing will do
what it takes to prevent any collapse of Chinese
share prices.
THIS WEEK'S ALPHA BET
This Week’s Alpha Bet starts with
A-S-X for Australian Stock Exchange with
plenty of China related action and IPOs.
LeeDee Holdings, a Zhejiang
province based manufacturer of natural biodegradable
packaging materials, is planning an IPO on the
ASX to sell up to 24 million ordinary shares at
fifty cents Australian per share. The IPO will
close on the 13th and begin trading at the end
of the month. LeeDee has been in business since
1987 and produces innovative materials such as
cellophane made from cotton pulp.
China Steel Australia Limited,
the owner of a nickel pig iron producer in Shandong
province is planning an IPO on the ASX priced
around twenty cents Australian. The IPO closes
on the 15th with trading next month.
And the Australian mining giant
Rio Tinto rejected BHP Billiton’s offer.
The decision comes after a huge investment stake
from Chinese conglomerate Chinalco, the
parent of Hong Kong and New York Stock Exchange
listed CHALCO, of $12.8 billion US dollars financed
by the China Development Bank along with the American
aluminum giant Alcoa.
And the anticipated blockbuster
IPO of China Railway Construction on the
Hong Kong and Shanghai markets is delayed awaiting
approval. It could raise up to $4 billion US dollars.
Tan Rongyao, spokesman of the State
Electricity Regulatory Commission was quoted as
saying possible IPOs of China’s giant State
Grid Corp and China Southern Grid Corporation
is back in the pipeline but no details were given
and approval must come from Beijing’s State Assets
Administration -- two really big possible IPOs
to watch.
KUNG HEY FAT CHOY! / XIN NIAN
KUAI LE!
2008 is the Year of the earth Rat.
It is the start of a new “great year” in the Chinese
calendar system and is the 25th year of the 18th
cycle of the 2nd epoch of the Chinese lunisolar
calendar. The last year of the earth rat was 1948
and before that 1888. Look back to those eras
for some clues as to what to expect this year.
Many blessings to you and your family!
I’ll see you next time!
