TRANSCRIPT: Big news in Chinese
telecoms with tests of China's 3G wireless standard,
the continuing slide in China stocks, and report
on the Greater Mekong Subregion economic summit
...
Sinomania! Volume II Webisode 54, April 2, 2008
This week’s Alpha Bet starts with
H for Hebei Province in northern China, the province
that surrounds the big province-level municipalities
of Beijing and Tianjin. The governor of Hebei
Mr. Guo Gengmao told a Hong Kong newspaper that
thirty companies from his province will IPO on
Hong Kong this year. This bit of boosterism was
lampooned by the Wall Street Journal but it does
reveal the process of corporatization as the Chinese
state spins off its assets and retools the economy
toward services and consumption.
Next a surprise H share placement
on Hong Kong late last week: 0552.HK or
China Communications Services a company
controlled by the China Telecom Group. The deal,
worth almost two billion Hong Kong dollars or
over $240 million US dollars, was backed by Cisco,
IBM, and Blackstone and the open
portion was about 2.3 times oversubscribed.
The company provides telecom equipment
and services and analysts believe the sudden share
sale and its success is related to the long awaited
unveiling of China’s 3 G wireless standard, TD-SCDMA.
China Mobile began today commercial
trials of it in eight cities (Beijing, Shanghai,
Tianjin, Shenyang, Guangzhou, Shenzhen, Xiamen
and Qinhuangdao) that are sites of Olympic events
this summer. Twenty thousand customers are participating
in the tests and many of the handsets are being
provided for free. Handsets for sale range from
3,800 Yuan to 1,800 Yuan. So a lot to watch there!
SAME TIME, LAST
YEAR
New lows are bringing major Chinese
stock indexes back to early 2007. The Shanghai
Composite closed April 1st at 3,329 down over
4 percent and back to its position of a year ago
although there was a brief rise last Friday on
a buying opportunity when some shares in Shanghai
saw double digit increases. The CSI 300
Index, last year’s darling, is this year’s dog
– one of the worst index performers of 2008 so
far – closed down another five and a half percent
April 1 to 3,582.86. Shanghai B shares remain
battered, lost almost five percent at close Tuesday
to 243.49, again back to last April.
ShenZhen stocks have fared
the worst, all major indexes there down over seven
percent April 1st. ShenZhen Bs lost another five
percent to 536.35 although they have recovered
somewhat from the collapse on March 18. The ShenZhen
Composite is barely at 1,000 and fell back to
last April.
Hong Kong shares are a bit better.
Both the Hang Seng and China Enterprise Indexes
are recovering. The China Enterprise Index,
shares of Red Chips, closed April 1st at 12,237,
reflecting investor belief that they are a better
value than their Shanghai cousins.
MACRO UPDATE
Despite paper losses in stocks,
the Chinese economy continues to race ahead. Industrial
profits were up February overall but the state-owned
sector sank almost thirty percent. All other sectors
were up and the most spectacular profits were
of private enterprises that surged 552%.
The most profitable industry sectors
were oil & gas majors (not surprising given oil
prices; all global oil giants currently have massive
profits), coal mining, construction materials,
and special machinery, transportation equipment,
and electrical components were all up with big
profits. The least profitable sectors were steel,
chemicals, and smelting, showing overcapacity
in those areas. The worst data came from electric
power companies whose profits were down over 60%
on the winter storms. And chemical or synthetic
fiber manufacturers are also way down.
Other economic indicators were largely
unchanged from January or the end of fourth quarter
2007 except industrial production and some exports
are slowing. Chinese consumer confidence was down
sharply in Guangzhou, Shanghai, and Beijing, the
probable areas of highest stock ownership although
Guangzhou was impacted in many ways by the severe
winter storms.
But is help on the way? Premier
or Prime Minister Wen Jiabao said this weekend
Beijing will ensure stability in the markets and
that it is important they stay healthy. Some in
and out of China interpret his remarks to mean
Beijing might resort to bailing out investors
if the market implodes much as Washington is currently
paying for the investment mess in New York.
RICE SUMMIT
Wen Jiabao made his comments at
the Third Summit of the Greater Mekong Subregion
Economic Zone or the GMS summit. The GMS was
initiated by the Asian Development Bank back in
1992 but suffered a setback in 1997 due to the
so-called Asian currency crisis. After a decade
it is back in focus particularly for Beijing who
wants to recreate the greater Chinese economic
area of past empires. Leaders from China, Thailand,
Burma, Laos, Cambodia and Vietnam are all present
and pledging further economic integration.
One of the big topics is rice. The
price of rice on world markets is up 30 percent
and stock levels in China are the lowest in years.
Nonetheless Beijing is assuring Chinese there
is no supply crisis and continues to allow large
exports. The high prices for rice will benefit
Thailand, long the biggest rice exporter.
The Greater Mekong Subregion is
backing infrastructure in the region with highways,
dams, and power transmission all in the works
and a big project to build a railway from Singapore
to Kunming the capital of the southwestern Chinese
province Yunnan, the place working the hardest
to build its economy south into Indo-China. The
GMS summit is underway now in Ventiane the capital
of Laos.
