NEW INVESTMENT STRATEGY FOR CHINA,
AN IPO UPDATE, AND A LOOK AT MARKET NUMBERS
By Ben Calmes
© Sinomania! 2007
First aired: March 14, 21:40 (PST)
[THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE
IN ITS FINAL FORM AND MAY BE UPDATED.]
ANNOUNCER: Hello! And welcome to Sinomania! For the
week of March 17, 2007 – happy St. Patrick’s!
Chinese shares continue to make up lost ground --
we look at the numbers and some interesting price movements
in the wrap; IPO news: a weak debut and a de-listing
slow down new issues; And a preview of what to expect
from this year’s National People’s Congress with big
changes on how China and Chinese invest their money.
China’s National People’s Congress is in session right
now and Tuesday begins the debate on what may be two
incredibly important and revolutionary new laws: one
to establish a legal definition of private property,
another to equalize corporate taxation of foreign and
domestic companies in China. The vote will happen on
Friday March 16 before the closing session of Congress.
I’ll have an in depth look at the work of the NPC in
next week’s show.
One idea that is green-lighted is the creation of a
national investment company modeled on Singapore’s Temasek.
The creation of an investment arm under Finance Ministry
is a direct result of the policy, discussed in earlier
segments of this program, of diversifying how China
manages its ever-growing foreign reserves. It is unlikely
that there will be any direct impact on say the buying
of United States debt, for example, as mentioned already
by Treasury Secretary Paulson who seems little troubled
by this change, secure in the knowledge that Japan will
always be there for America and probably remain, for
some time at least, the primary lender to the US Government.
Another idea is to allow Chinese individuals to convert
their Yuan holdings into foreign currency and directly
invest overseas. Agence France Presse reported that
such a move is being looked at by the all powerful State
Administration of Foreign Exchange or SAFE. The director
of SAFE, Hu Xiaolian, is quoted as saying that Chinese
companies will be encouraged to issue corporate bonds
including bonds denominated in foreign currencies. Hu
Xiaolian is a rising star in national politics and increasingly
one of China’s most powerful women.
Come back next week for a full look at this year’s
legislative session in China!
In early a company called TOM Online premiered on NASDAQ
promising riches from cell phone services in the world’s
cell phone market. Under symbol TOMO, the company made
a big initial splash and raised almost $200 million
US dollars. It quickly declined, built back up throughout
much of 2005 and started a high-profile joint venture
with Ebay. But TOMO peaked early last year and with
new regulatory changes in China’s mobile phone business
its revenues began to sink and the stock along with
them. This Monday TOMO was the market leader with an
almost 27% gain but that was due to the buyback price
of $15.56 from its parent the TOM Group which plans
to buy back the stock and de-list the company. TOM is
primarily owned by Li Ka-Shing, Hong Kong’s richest
man, who no doubt hopes to stop the bleeding and reinvent
the company, perhaps through its languishing Ebay project
TOM-Skype, an Internet phone service.
An update on our IPO report on Xinhua Finance Media
– the company debuted Friday on NASDAQ with symbol XFML.
XFML opened at $13 but fell instantly, declined again
on Monday almost 5% at ended the day trading at $10.80.
It was the weakest debut of the year to date on Wall
Street and no doubt reflects uneasiness in Chinese equities
given the roller coaster effect so far this year.
Despite the slowdown in Chinese IPOs, Tongjitang Chinese
Medicines is still on for its IPO on the New York Stock
Exchange this week or next under symbol TCM. Watch for
Beijing Automobile Industry Holding, a state-owned
firm with partnerships agreements with DaimlerChrysler
and Hyundai, is looking to list as an IPO sometime in
the near future but will probably float its auto parts
business as a separate IPO. No more details at this
time but it shows the continuing consolidation among
auto companies in China.
In a related note, Shanghai Automotive and First Automobile
Works Group both say they are not pursuing a possible
purchase of Chrysler but have been mentioned as in talks
with DaimlerChrysler along with Chery Automobiles, as
recently as March 8. Most analysts inside and outside
China say it is highly unlikely a Chinese company will
make a play for Chrysler. Meanwhile Chery is on for
producing vehicles for import to America within two
Shanghai and Shenzhen markets continue to gain lost
ground and are almost back up to the record high positions
before the February 27 dip. Both markets close up slightly
at the beginning of the week. The Shanghai Composite
index closed at 2,955 up a little more than half a percent
while the Shenzhen Component index closed at 8,131 down
0.19% -- charts for both of the indexes are located
at the top of the Sinomania! China Sharewatch webpage.
The Shenzhen composite index closed at 769.9 and is
getting tantalizingly close to its record high of 776.
Chinese markets overall remain significantly higher
than their January 4 start.
Positive price movements of note include TOM Online,
mentioned earlier, and Trina Solar up over 9%, Trina
Solar is now a part of NASDAQ’s clean edge index that
focuses on renewable fuels and alternative electricity
generation. Comtech Group, up over 7% on an analyst
upgrade by W.R. Henbrect, and on the downside, ASAT
Holdings down almost 10% on lower revenue growth.
May the luck o the Irish be with you on Saint Patty’s
I’ll see you next week!