Icbccss&p500usd Discussion Threads

[ftreader] 04/2/2004 14:12

energyi, I remember at the time of China Life's float last year some concerns were raised about it's accounts. Despite this the shares rose 50%. now the accounting irregularities have come to light....!!

Any idea where I can find a broker who will let me short chinese stocks. IMO many of these recent floatations are hopelessly overpriced.

[snowflake34] 04/2/2004 12:45

Here's the Daily Yomiuri on Japan-China trade:

ECONOMIC FORUM / China boom not certain to last


Kan Tsutagawa

Evidence is mounting for a sustained upturn in the economy.

A major factor behind this is the steady rise in exports. In particular, shipments to China are growing at a remarkably rapid pace.

Now some economists say the higher-than-expected growth in shipments to China may be the "magic wand" that helps end deflation in Japan.

In its monthly economic outlook for January, the government said the economy was now on a "steady recovery track"--the first time in three years that officials have predicted an upturn.

Any recovery this time, however, is almost completely dependent on growth in exports.

Japan's overseas shipments began increasing in the spring of last year, especially with regard to high-tech exports to the United States.

The growth in such exports later weakened due to the impact of the Iraq war, but exports to China remained on the rise, strongly enough to keep Japan's economic recovery moving forward.

This is a change from the past, when the revival of Japan's export-led economy was solely dependent on shipments to the United States.

This time, however, exports to China are also a major factor, meaning there are now not one but two giant engines driving the recovery.

According to trade statistics for 2003 released by the Finance Ministry last week, exports to China rose 33 percent year-on-year.

The country now accounts for about 12 percent of all Japanese exports, double the ratio seen in 2000.

When exports to Hong Kong are added to last year's figure, the ratio jumps to about 19 percent--a figure not far behind the United States, which takes about 25 percent of Japan's exports.

With the Olympics scheduled for 2008 in Beijing and a World Exposition in Shanghai in 2010, China is now in the middle of a construction boom, leading to large increases in imports of steel and related products from Japan.

In the high-tech field, companies from many other countries have been expanding production in China. As a result, China is becoming a "factory for the world." That also benefits Japan as it leads to rises in imports of parts for high-tech products.

Meanwhile, an increasing percentage of the Chinese population is entering a middle-income bracket, enabling them to purchase Japanese-made products.

Until recently, China was considered the root cause of global deflationary pressures due to its massive exports of cheap goods produced with low-cost labor.

This view of China has now changed drastically. Many economists now regard China as a locomotive powerful enough to haul the world's economy out of recession.

Japan undoubtedly tops the list of nations that will benefit from China's economic growth. It is a situation reminiscent of Japan's situation at the time of the Korean War more than half a century ago.

In those days, Japan was suffering from deflation because of belt-tightening measures adopted by Joseph Dodge, the U.S. government's special economic adviser to the Occupation.

After the outbreak of the Korean War in 1950, however, sales to U.S. forces in this country led to a special procurement boom. The result was a rapid resuscitation of the Japanese economy, paving the way for the subsequent era of high growth rates.

Half a century on, however, and Japan is again battling deflation, this time as a result of the bursting of the bubble economy.

An end to deflation remains elusive despite several rounds of fiscal pump-priming and a variety of other financial steps intended to revive the economy.

As a way of extricating the country's economy from this period of adversity, some analysts have high hopes that Chinese demand can do for modern Japan what the Korean War did for Japan more than 50 years ago.

The question is whether such a dream can come true.

In 2003, China's economy grew 9.1 percent from the previous year.

If such robust growth continues, chances are that Japan will be able to tackle its long-running supply-demand discrepancy and eventually overcome deflation.

A number of land mines still lurk under China's economy, however.

Among them are economic bubbles involving property, ballooning bad debts at banks, imbalances in economic development between coastal and inland regions and growing demands from abroad for revaluation of the yuan.

Should the Chinese economy hit any one of these land mines, the recent period of rapid growth could come to a shuddering halt.

A few years ago, Japan put all its hopes on the information-technology boom in the United States.

The end of the boom was a shattering disappointment to Japanese business, and sent the economy back into a long period of stagnation.

The danger is that the current high hopes for the Chinese economy could prove equally ephemeral.

Will China's rapid expansion mean real relief for the Japanese economy?

Whatever happens, it is clear that the fate of the nation's economy now depends not just on growth in the United States, but also China.

The future of Japan's giant neighbor has never been of greater interest.

Tsutagawa is economic news editor of The Yomiuri Shimbun.

[snowflake34] 04/2/2004 12:18

Another article about China's banking companies:

China's state banks to issue $36bn in bonds
By Financial Times reporters
Published: February 4 2004 6:39 | Last Updated: February 4 2004 6:39


China's big four state-owned banks, eager to attain levels of non-performing loans and capital adequacy acceptable for a stock market listing, plan to issue up to Rmb300bn ($36bn) in subordinated debt in the first quarter, state media reported.

The new renminbi-denominated bonds are believed to target domestic institutional investors, according to state media. If successful, the move would help the banks attract strategic investors who expect them to meet the Basel accord's minimum capital adequacy ratio of 8 per cent.

It would also satisfy China's requirement the banks must achieve NPL ratios of less than 10 per cent and capital adequacy ratios - the proportion of capital to total assets - of more than 8 per cent before they can list.

In December, the China Banking Regulatory Commission issued rules allowing domestic private and state-owned banks to shore up their capital bases by issuing subordinated or second-tier debt.

Last year the government provided the Bank of China and China Construction Bank (CCB) $22.5bn each in capital injections backed by foreign currency reserves. CCB is preparing to list first, possibly this year or in 2005. Bank of China may list next, possibly in 2005, followed by the Industrial and Commercial Bank of China (ICBC).

Bank of China took provisions in 2003 for bad loans of Rmb24.64bn and wrote off a further Rmb22.98bn, bringing its NPL ratio down by 6.45 percentage points to 15.92 per cent of total assets, the bank said in a statement. Total NPLs in the bank stood at Rmb343.8bn at the end of 2003.

China Construction Bank, which is expected to try to list on the stock market before Bank of China, made operating profits of Rmb51.2bn last year, 33.9 per cent more than in the previous year. The bank's NPL ratio was at 11.84 per cent at the end of October, bank executives said.

The Beijing government, which has already spent Rmb1,670bn on bank bail-outs since 1998, is believed to have earmarked another $55bn for the banks' recapitalisation. The "big four" hold Rmb2,000bn in non-performing loans in total.

[snowflake34] 04/2/2004 12:15

Re the China v US thing - here's George Soros on the subject:

[mcbeanburger] 04/2/2004 08:26

I remember during the 80's the communists friends thought that there would be a war between Japan and the US. That looks very unlikely now. Agree China and US are of the same order. One climbing and the other falling, one with aspirations and the other with delusions. Very possible IMO.

[energyi] 04/2/2004 08:12

Ian Gordon believes there will be a War one day...

Between China and the USA over Oil.
Probably in Central Europe... one of the oil-rich "stans"?

[energyi] 04/2/2004 08:03

Shanghai SSEE, has pushed up to 1650 resistance

[mcbeanburger] 03/2/2004 17:21

I still think China will suck in commodities for most of this year. The FA on China commodities is still sound IMO. Sorry I didn't make that clear in my post.

[energyi] 03/2/2004 17:10

ALL THE CHINA SHARES, trading in the US,
dropped big on the opening today

[snowflake34] 03/2/2004 15:10

ASIA-PACIFIC: Beijing plans big financial markets expansion
By Richard McGregor in Shanghai
Financial Times; Feb 03, 2004



China yesterday signalled a substantial expansion of its domestic financial markets, reversing a long period during which little was done to combat falling investor confidence in its listed companies.

A declaration by the State council, China's cabinet, said the government would strengthen institutional investors; increase financing channels for securities companies, many of which are now running heavy losses; and attract new sources of funds into the market.

Publication of the document follows sharp criticism of China's leaders for failing to back regulators in tackling the deep-seated problems of the languishing stock and corporate bond markets.

"This amounts to a second revolution in China's capital markets," said Han Zhiguo, of the Banghe Fortune Research Centre in Bei-jing.

Unlike the initial period of stock markets in China, which Mr Han said had operated in a "distorted" way, the new manifesto would make the country's bourses operate in a "fully market-oriented manner".

The announcement coincides with a growing consensus among Chinese policymakers on a fresh approach to the market's most intractable problem - how to unload the state-owned shares in listed companies.

About two-thirds of the shares in listed companies are still held by the government or state entities, and their potential sale into the public market has been the biggest single factor in the slump in prices since mid-2001.

The government is considering a new plan to allow a number of the listed blue-chip state companies to begin selling down their state shares, in order to test whether they can be unloaded without causing a collapse in prices across the board.

Individual companies could be allowed to negotiate agreements with existing holders of their publicly traded shares on how to manage any gradual sell down in individual enterprises.

By calibrating sales to the demands of each company, such a policy would differ sharply from the previous one-size-fits-all approach for the market, which has proved disastrous in the past.

The document issued yesterday says that the government will "protect the rights of public investors" in any reforms to the markets and to shareholding structure.

In the longer term, the document supports the establishment of a so-called "second board" for start-up companies and allowing approved Chinese investors to invest local funds into overseas stocks.

The local market went into a slump in mid-2001 when the government began to raise money for its national pension fund by selling state shares.

There have been two truncated revivals since then, and the market began tracking upwards again last November, in a trend which many analysts say has been strengthened by yesterday's document.

[snowflake34] 03/2/2004 15:08

ASIA-PACIFIC: China launches crackdown on bank network
By James Kynge in Beijing
Financial Times; Feb 03, 2004



Chinese authorities have launched their biggest crackdown for a decade on a network of underground banks, closing down funds that handled hundreds of millions of renminbi in an attempt to combat laundering and inflows of "hot money".

The State Administration of Foreign Exchange (Safe), a body that manages China's $403bn (€324m, £221.7m) in foreign exchange reserves, said yesterday that a police investigation into money laundering had led to the arrest of 79 suspects in the eastern provinces of Guangdong, Heilongjiang, Zhejiang and Fujian.

The crackdown, which also resulted in the recovery of Rmb18m ($2m, €1.75m, £1.2m) and frozen bank assets worth Rmb70m, was aimed at reasserting control over capital flows and eradicating irregular transactions that allow in "hot money".

Such speculative inflows, which may have totalled $50bn last year, have become one of the central bank's biggest headaches. The inflows not only boost money supply and stimulate excessive credit growth but add to foreign exchange reserves, providing ammunition for those who argue that China's renminbi should be revalued.

The crackdown on underground banks was too small, analysts said, to have an immediate or marked impact on hot money inflows. Nevertheless, it demonstrates a new level of determination to plug the holes in China's increasingly porous closed capital account.

The closure of such banks could have an impact on local economies, analysts said. In some areas, such as the booming east coast city of Wenzhou, they accounted for as much as a third of business lending, according to research by the China Academy of Social Sciences.

In the mid-1990s the government closed many of the banks after they started using gangsters to collect debts - but that drove them even further underground.

In a separate sign of China's frustration at the inflow of hot money, an official newspaper said speculators betting on a renminbi revaluation were inflating real estate prices. "Speculation about a revaluation has started affecting the normal development of the domestic economy and the pillar property industry," the China Real Estate News said. Wang Guotao, construction minister, has ordered officials to step up efforts to "prevent the overheating symptoms in some areas from evolving into a nationwide problem".

[mcbeanburger] 03/2/2004 08:51

From a FA point of view I think not, maybe in Q4 me thinks.

[energyi] 03/2/2004 08:36

Have we seen the peak in the China Bubble?

The charts in the header, suggest we may have

[energyi] 01/2/2004 21:05

3)

Not all Western companies will succeed in China, and those that do have learned how important it is to understand who is due what. They realize that certain things are expected in return for help...not necessarily a bribe as in other countries, but a bit of recognition, an introduction, an invitation, a courtesy...whatever.

The other point about a rule of men is the way it handles change, as the people who hold power (currently the Communist party right down to local officials) decide whether and when to enforce it. One way to creep up on change is to hold back the power. For instance, as we already saw with
the currency, officials might "overlook" taking more than allowed outside the country.
[See Lynn's article on 'Unpegging the Yuan' on our website at:
]

That way, things can change without declaration. If they work, progress is made and the laws may catch up later. If they don't, the law can suddenly be enforced and those in power can quite honestly claim that they never passed a bad policy and are only affirming the way things have always been.

There's more change going on in China than the popular press can even tell us. Much of it will continue to happen below the radar.

But overall, China is an extremely attractive investment now. It has joined the World Trade Organization, and it will adopt rules and practices that foster smooth trade. Not always smoothly, but eventually. Its politics will continue to offend democratic sensibilities at times. But it desperately needs money. And that makes the long-term outlook for its development of more industry and trade is very strong.

Not long ago, half China's GDP was spent covering the debts of its inefficient and bankrupt SOEs. China can't afford to go back. But you as an investor can't afford to neglect China's history and culture, either. It will go forward in
its own fashion.

(Lynn Carpenter For the Daily Reckoning)

[energyi] 01/2/2004 20:53

2)

We think of China as huge. And so it is in terms of its size, population and world stature. But economically, in 1978 when China began to open to trade, it was very small, given its size and resources. It is still well back of "fully industrialized" status across the country.

China's average household income last year was US$4,400.

That's low. If it were evenly spread, it would be low for most people. But it's not. The average in the eastern cities is three times as high as in the western provinces. Plus, an estimated 150 million unemployed migrants from the poorer
west have travelled east. They hover around China's great cities seeking jobs, any jobs. They work cheap.

And each time China closes down an SOE and throws it into the private sector, people lose jobs. SOEs tend to have too many workers. That's another reason China must go slowly in privatising. If it goes too fast, it will make unemployment
so bad it could topple the government.

Privatising China's thousands of SOEs piled up the fuel for China's expansion. It was finding a place to trade that set it on fire.

In 1978, China decided to set up special zones within the country to ease foreign trade and investment and allow Chinese to develop their own businesses. The first five special zones were created in 1980. By 1984, 14 more cities joined the list. Then in 1985, China decided to expand the network to include large swaths of the east coast and the Yellow, Yangtze and Pearl River basins.

Westerners rushed in, knowing nothing. They found that one day, all was well. Contracts were signed, money invested. Then, suddenly, contracts were cancelled and sunk money was lost.

That's when you started hearing the cries that China has no rule of law. It's true, strictly speaking. China follows the opposite system: the rule of men. A true system, but the two don't mesh easily.

Europe followed a rule of men for much of its history, too. Kings, queens and local nobles once had this same power system. Power was a matter of the right connections, the right alliances. In China as in medieval Europe, laws may
exist, but whoever is in power gets to decide how and when to apply them.

This is very important to China. A matter of dignity. It is changing, but it is still key to doing business there. With its larger role in international trade, China is accepting the role of the written contract. But other, subtler laws point to a rule of men persisting and shaping how things are done in China. Where there is a rule of men, personal relationships are extremely important.

[hectorp] 31/1/2004 15:29

STAN Bank to benefit from Hong Kong..

Standard Chartered perked up 14½p at 896p as JP Morgan raised its earnings forecasts on the back of the bank's plans to incorporate itself in Hong Kong. With tax in that territory set at 16 per cent, against a marginal rate of 30 per cent in the UK, the US broker has increased its 2005 earnings per share forecast by 21 per cent.'

[hectorp] 30/1/2004 14:37

I fear possibility that every fowl in the Far East in human contact may need to be destroyed causing famine in rural areas! What is needed is an immune strain of chicken goose and duck, and this is an awsome situation. This bird flu could be utterly disastrous , like Foot and mouth was here - after SAARS too. Bad luck far east.
I am hovering to close all my open positions, but have not yet.

[hectorp] 27/1/2004 19:44

agree snowflake.
Can I add, apart from STANdard Chartered, my investment in the Far East is entirely via Investment Trusts and .. Hedge Funds ( at times not at this moment ) beacuse its a lot easier to let them take care of the list of investments. I do not do that with UK or European stocks , only Far East and Emergings.
but I also have some holdings in Giffin Mining epic GFM which is our only! China-partnered zinc and gold exploration company. Its recently been in the press. Go to the GFM thread to study the company. Its early days yet.
Hector

[snowflake34] 27/1/2004 12:19

daniel, both HSBC and Standard Chartered have a presence in China. Also all the mining companies such as RioTinto and Anglo American export vast quantities to China - but be careful - most of these companies are now already trading at a premium. As always, do your own research. I'd recommend printing out their accounts and trying to see if you can spot some value that the market has missed. Good luck.

[snowflake34] 27/1/2004 12:15

Has anyone got access to the Ft's subscription service? If so can you copy and paste the article in there about China possibly revaluing the renminbi? Thanks in advance.

[danielk] 26/1/2004 09:51

any chance of highlighting the various uk listed companys that stand to do well out of the chinese economic boom?

[hectorp] 24/1/2004 17:58

BBMuppet, UK fund managers are greatly upping their exposure to Japan and China.
This is a growing trend of course.
Be good to see the Hang Seng back on Monday, been missing the Cina news.