TRANSCRIPT: Is there a crisis in
rice? An IPO bright spot in Shanghai; China First
Quarter 2008 macro data; and the Boao Forum sets
stage for historic moment between CCP and KMT...
Sinomania! Volume II Webisode 56, April 21, 2008
The United Nations special envoy
for the Right to Food, Monsieur Jean Ziegler,
created a firestorm when he announced with some
fanfare that rice supplies would not hold up and
that financial speculators were driving prices
and potentially creating a “silent famine.”
The price of rice is up dramatically
and well-publicized riots over supply in poorer
countries has lead to hoarding from Southeast
Asia to Silicon Valley.
The UN buys large quantities of
rice for its World Food Program and Monsieur Ziegler
also blamed diversion for bio-fuel production
in some countries for exacerbating the rice crisis.
President Lula of Brazil however struck back.
Speaking at the opening of the FAO summit in Brazil,
Lula said the agricultural subsidies of rich nations,
particularly the EU, are more to blame.
Fact is, the supply of rice for
international trading in 2008 is forecast at just
under 30 million tons, down only one percent from
2007. Large new harvests are expected in the second
half from Latin America and South Asia leading
to an increase in supply by the fourth quarter.
While speculation in rice is probably
occurring in some cases it is doubtful rice will
become a hedge commodity. Only four to five percent
of global rice production is traded. The largest
rice wholesaler in Hong Kong, Golden Resources,
says prices are near the peak barring a big natural
disaster. Rice is not wheat.
The Chinese bear market continues.
The Shanghai Composite Index remains down almost
50% from its peak October 2007. It is the worst
performing major index in world and closed April
21 at 3,116.98. The CSI 300 Index is flat and
closed Monday at 3,267.55. B shares barely move,
Shanghai Bs closed April 21 at 219.36, ShenZhen
Bs at 517.33, both up on moderate gains from their
On the upside, the Hang Seng
China Enterprise Index appears to have bottomed
out, closed April 21 at 13,015.25, up over two
and a half percent on the strength of PetroChina
shares. On Taiwan the TAIEX index continues
its climb back and gained just around a percent
today to close at 9,083.32.
One bright spot in Shanghai is the
IPO of Jinduicheng Molybdenum (601958.SS),
first mentioned last year on The Sinomania! Show,
on the Shanghai domestic exchange only the third
IPO of the year in Shanghai. The stock rose over
36% on its trading debut late last week, and raised
over one and one quarter billion US dollars. It
has since declined and was down nine percent today.
So far less than $8 billion US dollar
value has been raised this year in Shanghai down
almost a third from a year ago.
THE ALPHA BET
This show’s Alpha Bet starts with
2899.HK, for the H share of Zijin Mining
trading on Hong Kong. Zijin is expected to make
its Shanghai debut in May. The company is one
of China’s biggest gold miners and according to
the Shanghai Securities Times it could
raise over $1 billion US dollars.
Next SGQ.V for coal miner
South Gobi Energy Resources trading on
the Canadian stock market. The coal group plans
a secondary share offering in Hong Kong sometime
in the second half.
1Q MACRO REPORT
China is now the world’s second
biggest exporter behind Germany and ahead
of the USA with merchandise exports in 2007 valued
at $1.2 trillion US dollars.
Real GDP growth slowed to
just above ten and half percent in the first quarter.
Exports grew over twenty percent in dollar terms
but in Renminbi terms only twelve percent considerably
less than first quarter ’07, the slowest growth
since 2002. And China’s trade surplus was down
Retail sales rose over twenty
percent the first quarter, 12.3 percent in real
terms. Consumer inflation was down marginally
to 8.3 percent in March with food inflation
down slightly to 21.5 percent according to
Morgan Stanley estimates.
However energy and raw materials
continue up, the latter rising almost ten percent
for the quarter. And fixed investment surprised
analysts by surging almost twenty-six percent
in the first quarter.
THE BOAO FORUM
The recently concluded annual session
of the Boao Forum, the Chinese Davos, shows evidence
of political shifts in Asia. The new Mandarin
speaking Prime Minister of Australia Kevin Rudd
was there along with leaders from Chile, Kazakhstan,
Mongolia, Pakistan, Qatar, Sri Lanka, Sweden,
Tanzania, UN Secretary General Ban Kee-moon, former
British Prime Minister Tony Blair, former French
President Jacques Chirac, and former U.S. Secretary
of State Colin Powell, along with large contingents
of business executives and dealmakers. Presiding
over it all was Chinese President Hu Jintao.
The biggest development by far was
the roundtable discussion between Hu and Vice-President
elect of Taiwan Vincent Siew. The twenty-minute
meeting was the longest and highest level dialogue
between the Chinese Communist Party and the Kuomintang
Party in many years.
At its conclusion Vincent Siew issued
a sixteen-character statement saying the two sides
should “face reality, take sight of the future,
shelve disputes and pursue a win-win scenario.”
Siew told reporters that the meeting "turned a
new page in history."