Icbccss&p500usd Discussion Threads

[energyi] 18/11/2003 07:25

As Shanghai tests its lows...
The China Funds traded in the USA begin to fall

[hectorp] 15/11/2003 18:25

hmmm so they are gonna go up, then they're gonna go down..
thats an age old story!

I'm still long China and Hong Kong equities and also 10-12% Australian, 5% Taiwan and 10% Korea. I am tempted to swith my equities to a neutral or defensive position. However even though the US markets are liable to profit taking, and why not, there should be a resurgence in Western equity market in the New Year.
I'm inclined to maintain my equity exosure as a long term investment, in the far East.
I agree that we should be overweight commodities at the moment.
- a parting comment - w hat is gonna create inflation in the West and thus deflate US and UK budget deficits? probably rising raw materials prices.

[energyi] 13/11/2003 07:52

MORE CHINESE BUYING...

I Sat next to a Singaporean broker at a mining event last night.
He told me that friends of his in China were telling him that the Chinese
are losing confidence in the US dollar and are beginning to buy commodities
instead, BEYOND THEIR NEEDS. Reminds me of the late 70s, where stockpiling
of commodities forced up the price. But once the price action slows, those
commodities can get disgorged, triggering sharp price drops.

[energyi] 12/11/2003 06:40

Hongkong market (see Header) looks vulnerable.
MA cross coming, needs sharp rise to prevent break

[keyboard] 07/11/2003 11:22

INTERVIEW - Rio Tinto cools on China mining, looks to ship minerals

by Elliot Wilson ----

BEIJING (AFX-ASIA) - Global mining firm Rio Tinto PLC's interest in tapping China's natural resources has waned over the past three years, as market protectionism and logistics problems have forced the company to focus instead on shipping minerals into the country.

The company had lowered its expectations and commitments to the China market over the past few years, Rio Tinto's chief economist David Humphreys said on the sidelines of the World Economic Forum, a major business conference, in Beijing.

"Over the past three years [Rio Tinto's] expectations from the market have become more realistic," he said.

The same was true of multinational mining firms in general, he said. "The level of commitment from global mining firms to China is lower than three years ago," he said. "There has been a general retrenchment."

Humphreys said selling resources into China was now the name of the game, and this was reflected in the company's balance sheet.

He said Rio Tinto exported 600 mln usd worth of resources into China in 2002, and said this year's total would be "significantly higher."

"China makes up only six pct of our global business but more importantly it is a significant part of our growth," he said. "About three-quarters of our China sales are iron ore, and because of increased iron ore prices and higher demand in China, we expect iron sales to increase this year."

Legal obstacles, local protectionism, bureaucracy and a general lack of knowledge about China's real level of mineral reserves continue to prevent the heart from ruling the head for multinationals, he said.

"We simply don't know what is here," Humphreys said, "and without knowing what deposits are there the level of interest is academic."

He added that the cost of sourcing minerals in China's vast hinterland could be the same as, or higher than, shipping the resources into the country from regional mines, such as those in western Australia.

"This is a huge logistics issue. A lot of China's infrastructure is focused on the developed coastal regions, and if we find resources a thousand kilometers inland, it may be easier just to ship stuff in."

Another significant hurdle is the legal distinction between the right to prospect for minerals and the right to mine it.

"There are no guarantees that having found something you will gain access," he said. "What we don't want is to spend money on finding something and then see the right to mine it given to someone else."

Even if a firm is given the right to dig, he said, there remains a whole sedimentary level of approval levels to dig through, including the Ministry of Land and Resources, the State Administration of Foreign Administration and even the People's Liberation Army.

The one spot of light in the sector comes from the southwestern province of Yunnan, where a trial experiment is under way allowing mineral prospectors the legal right to mine the resources they discover.

But Humphreys cautions that this trial is a tentative and small project very much in its early development stage.

On the prospects of a nation-wide opening up of the sector, he is downbeat.

"I wouldn't hold your breath," he said. "As long as China can secure its own resources, I see no reason for it to change. I don't even think it's a high priority of the Chinese administration to encourage [outside] investment."

The bigger issue for Humphreys currently was the increasing interest shown by domestic firms and industry groups in mining abroad.

He said the big players in China's copper sector were working together to identify mineral reserves abroad, while the country's iron industry had been actively looking to secure reserves in Australia and Brazil.

Chinese mining firms have also been securing bauxite reserves in Vietnam and lead-zinc reserves in Mongolia, while domestic company Beijing Shougang has bought a 100 pct stake in an iron ore mine in Peru, called Shougang Hierro-Peru.

Humphreys said the Chinese interest in securing overseas mineral deposits will only grow as the country looks to sate its growing need for base elements.

"The interest in securing resources abroad is increasing, and this will continue for some time yet."

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07/11/2003 07:56

[energyi] 06/11/2003 11:47

COLLAPSE "into a heap" coming...

China's Lack Of Internally Produced Metals and Minerals Presents
A Huge Window Of Opportunity For Western Mining Companies.

The well informed magazine Commodities Now produced a special edition to mark London Metals Exchange Week and among a series of interesting articles on base metals at a time of rising prices, was one on China. As the writer Melinda Moore points out, China is now the biggest factory in the world and its hunger for base metals is unabated. As some analysts are now saying that demand has now been superceded by hype and that the whole thing is going to collapse in a heap it is a good time to take a look at the facts. It is also worth remembering just how few analysts and commentators started to draw attention to base metals a year ago when prices were in the pits. Now they are up near record levels and egg is smeared on many a face.

@:

[corrientes] 06/11/2003 08:04

And there could be social unrest if the Government fails to meet the aspirations of a generally increasingly wealthy population wuithin a reasonable time.

[energyi] 06/11/2003 07:16

In fact, mining exploration is increasing dramatically in china.
But finding & building new mines takes years

[rambutan2] 05/11/2003 19:48

a simple question: why doesnt china produce any copper or plat, surely in such a large land mass their must be some base metals to dig up?

[keyboard] 05/11/2003 12:32

FOCUS - China's auto sector has peaked; 2004 growth expected to slow

by Elliot Wilson ----

BEIJING (AFX-ASIA) - China's auto sector growth has peaked, with signs of considerable oversupply and the probability that car sales will slow next year, analysts said.

Perhaps more alarming for the world's fastest growing major car market, some multinational manufacturers are obviously failing to break into the country, with some even shelving plans to enter or expand their presence in the near future.

"It is likely that growth in the next few years will slow down, given the fact that oversupply is serious," said Jia Xinguang, chief analyst at the China National Automotive Industry Consulting and Development Corp in Beijing.

"Manufacturers have misjudged market demand," he told AFX-Asia.

The sentiment is shared by John Bonnell, a partner at auto consultancy Automotive Resources Asia in Bangkok. "Many China watchers believe the market will continue humming along until 2008, then slow down, but my gut feeling is that the market will slow down next year."

Both analysts are particularly concerned that the real size of China's middle-class -- the Holy Grail demographic for the auto industry -- is considerably smaller than carmakers would have themselves believe, with current sales really driven by a smaller, wealthy urban elite.

Car sales soared 69 pct year-on-year in the first nine months to 1.454 mln units, after 55 pct growth last year.

But Bonnell said sales were "driven by a relatively lightweight group of wealthy citizens."

Jia echoed this sentiment. "Car companies have an over-optimistic perception about China's middle class," he said.

This enthusiasm has led to rising inventories, which has already led to aggressive price cutting in some segments of the market, and which many worry will catch up with automakers sooner rather than later.

Faced with such a buoyant market, some manufacturers are also setting unreachable targets.

Figures from the China Association of Automobile Manufacturers (CAAM) showed that unsold car inventories were running at 80,000 units as of the end of September, but Jia believes the real figure could be more than 25 pct higher.

"I think the actual number could only be higher," he said, possibly more than 100,000.

The biggest loser so far appears to be Italy's Fiat Spa, which has seen sales fall -- in the case of some of its brands, quite spectacularly -- over the past year.

Jia said this was largely due to its presence in the mid-range sector.

"Fiat has so few models here, and unfortunately they all fall in the most heavily over-supplied sector."

Total sales of Fiat's four China brands, all subcompact cars, fell to 2,579 units in September alone from 3,297 a year earlier. Sales of its flagship Palio marque fell to 861 units in September from 1,792 for the same month a year befor e, although much of that drop has been offset by rising sales of its new Palio Weekend brand.

Sales of its minicar Eagle brand plummeted from 75 units in Sept 2002 to a single unit in September this year.

Jia said this spectacular drop was mainly due to political factors. Fiat is believed to want to end production of the Eagle at its base in Nanjing, but local government officials are pressuring the joint venture not to pull production of the brand.

In spite of its poor performance, Fiat's chairman Umberto Agnelli, pledged this week to maintain its presence in the market and continue to invest.

Other bigger, more successful multinationals are also promising more investment.

Yesterday General Motors Corp said it would expand its joint ventures here to boost production capacity by at least 50 pct to 766,000 units a year by the end of 2006.

But other major foreign auto firms have chosen abstinence from the Chinese market rather than a brief dalliance ending in financial divorce.

Fuji Heavy Industries Ltd has abandoned plans to manufacture its Subaru brand in China, with the company saying any launch of the marque would be "premature."

The most tentative major foreign automaker is certainly France's Renault SA. The company's time in China has not been charmed -- its joint venture in the central Chinese province of Hubei, Sanjiang Renault Automobile Co Ltd, has the capacity to make 40,000 buses a year, but has turned out a paltry 5,000 units since the plant was opened in 1994. The French company has not given up however. It plans to sign an agreement by the year end with Dongfeng Motor Corp to produce Nissan trucks.

However, it remains absent from the passenger car market.

Renault's chief executive Louis Schweitzer said yesterday in an interview on French radio that the firm would be building cars in China by 2010, and would announce its China expansion strategy "in spring 2004."

He said Renault may make use of its 44.4 pct stake in Japan's Nissan Motor Co as leverage to enter the market. Nissan has a joint venture in China with Dongfeng, China's third-largest auto maker.

But it is unclear whether Renault is making such a late arrival in China for political or practical reasons.

China National Automotive's Jia said: "Renault's investments in China have been a failure, which has made it harder to convince the Chinese government to start any new investment."

But he said this should not prevent Renault from entering the market as soon as possible, especially if it is simply waiting for China to honor its WTO obligations to fully open the market to foreign firms by the end of 2006.

"Renault could be being short-sighted if they are delaying their investment in China simply because they are waiting for the market to open further or for import tariffs to be cut."

However, this gloom has not penetrated the big hitters -- Volkswagen AG's two joint ventures with Shanghai Automotive Industry Corporation and First Automobile Works have seen booming sales this year.

Sales of its Bora sedan, for example, rose 55 pct in the first nine months of this year to 54,841 units.

Investment continues to grow at a fevered pace. Yesterday, Japan's Toyota Motor Corp confirmed it is in talks with Chinese authorities to manufacture up to 300,000 cars in southern Guangzhou province.

So for now, despite teething problems, every auto maker wants to remain, become, or at least to be seen to want to become, a part of China's market.

But with most of the world's car markets showing low growth, even in traditionally reliable markets such as Germany, China is the one glimmer of hope.

Analysts say China offers the greatest possible hope for growth and profit over the next few years.

"This is why Fiat doesn't withdraw from the market," Jia said. "Nobody wants to withdraw from the market, even though their performance may be poor."

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05/11/2003 10:49

[energyi] 05/11/2003 00:44

The chart is a weekly one of the China Fund (CHN-NYSE) and the Greater China Fund (GCH-NYSE). These two closed end funds are both trading at substantial 20% plus premiums to Net Asset Value (NAV). Given the sharp rise in these stocks over the past several weeks (CHN up 150%, GCH up 95% in 2003) we can only say that the China based stocks may be becoming the new internet bubble.

NO PUT OPTIONS exist on these, unfortunately

[hectorp] 04/11/2003 22:14

Reducing China's growth from 40% this to 20% next year isn't much of an argument for duping China based investments ( but it might be a warning fro base metals and some other commodities - theough not particularly Gold IMO). Neither is the phrase' the word on the street is overheating' or similar.
That it could hit Japan seems obvious, and I'd be cagy of holding so much Japan Funds.
Somethign we often fail to remember is the effect of currencies on our ewquity investments over a few months. Moving one's investments from a country, can create furterh issues relating to which currency to move into next.

I'll need much more evidence that there will be a major turnaround in the Hang Seng etc before I sell off my Fund holdings there.
And after all if not the Far east, whhere's left? Not Europe, not the US.
I think some of us would feel a bit daft dumping strong growth investments now... just when we have found a region which is not in big trouble. I'm up around 24% since April and was looking for a li'll bit more.
- well, thats my view this week... I'd need much more evidence to close on my Far East holdings.
cheers
H.

[energyi] 04/11/2003 16:40

From dead Reckoning:

Meanwhile in Shanghai, we read, the sheer weight of all
that new construction - added to the disruption of the
substrata caused by the need for massive foundations - is
causing the land to subside at the architecturally
significant rate of 1-2 centimetres a year.

[energyi] 04/11/2003 06:11

Meantime,
the China SSEC seems to have started a BOUNCE off a triple bottom.
How do you buy that and short the US-traded China Funds?

[energyi] 04/11/2003 06:00

Early for all of us.
I just woke up, and it's an early morning for me.

I do have a feeling that the China story has run a bit too hard recently,
and all manner of sheep are jumping on the "let's buy commodities that China
needs" bandwagon. If China itself, sees a need to slow, then maybe it is
time to get out.

REMEMBER: I tend to be early on these turns, so be careful.
Notice that this thread was started March 1, this year.
I was looking for an Area where I could be bullish (apart from Gold).
The big markets turned up two weeks later.

[shoggoth] 04/11/2003 05:55

Ah Steven Roach - he was the guy who predicted a global recession in 2003 due to SARS.

Dated the beginning of April this year, it seems like he was spot on for timing the rally.

[mcbeanburger] 04/11/2003 05:44

oi a bit early for you isn't it

[mcbeanburger] 04/11/2003 05:43

yes finally a bearish article on china. about time.

[energyi] 04/11/2003 05:42

Any puts on those China Funds, I wonder...