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Demand Swamps New Chinese Exchange
ChiNext, China’s new stock exchange, opened Friday with a bang. From the Financial Times:
Investors piled into the fledging market in the hope that its technology and innovation-driven start-ups would become future heavyweights. But some experts were sceptical.
“There’s a lot of belief that somehow the next Microsoft is lurking in there, which you’d be a fool to believe,” said Fraser Howie, author of Privatizing China: Inside China’s Stock Markets.
One of the most popular stocks was Huayi Brothers Media, the movie maker famed for putting kung fu stars Jet Li and Jackie Chan in the same film. It soared 148 per cent above its flotation price.
The rest of the companies, ranging from software to robot designers, made similar gains, led by Chengdu Geeya Technology, a maker of digital television equipment, which more than tripled in value.
See also “ChiNext: China’s New Gambling Hall” from Seeking Alpha.
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- November 2, 2009 10:38 AM
China Stocks ‘In Deep Bubble,’ May Drop 25%, Xie Says
Bloomberg reports:
China’s economy isn’t “sustainable” and the benchmark Shanghai Composite Index may fall another 25 percent, former Morgan Stanley Asian economist Andy Xie said in an interview.
“The market is in deep bubble territory,” Xie, who correctly predicted in April 2007 that China’s equities would tumble, told Bloomberg Television.
The Shanghai index plunged 6.7 percent to 2,667.75 today, the most since June 2008 and entering a bear market, on concern a slowdown in lending growth may derail a recovery in the world’s third-largest economy. Xie said the index “should be 2000 or less.”
See also “U.S. stocks futures lower as China sinks again” from MarketWatch.
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- August 31, 2009 12:19 PM
World Stocks Gain as China Wobbles Ease, Oil Jumps
The latest news on the fickle Chinese stock market, from AP:
Global stocks rebounded Thursday as China’s wobbling market clawed back some of its steep losses and oil prices jumped on signs of improving demand.
The 20 percent drop in the Shanghai benchmark since Aug. 4 sent ripples of fear through world markets this week as investors fretted the government might tighten credit that has helped fuel a massive rally in Chinese stocks since March.
Some of those fears dissipated Thursday with an unexpected fall in U.S. crude inventories raising hopes of recovery from recession and solid gains in Chinese stocks.
The Shanghai index surged 126 points, or 4.5 percent, to 2,911.58, while Japan’s Nikkei 225 stock average advanced 179.41 points, or 1.8 percent, to 10,383.41. Hong Kong’s Hang Seng rose 374.63, or 2 percent, to 20,336.36.
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- August 20, 2009 9:07 PM
China Markets Heading Into Bear Country
The New York Times reports:
The Shanghai composite closed down 4.3 percent for the day, and the drop in Chinese shares reverberated around the world as investors took note of the rapid decline.
China’s giant economy is set to outperform much of the rest of the world with growth of 8 percent or more this year, according to most economists. The Shanghai market has riveted the international investment community this year, gaining nearly 90 percent through July.
Many analysts, though, have been warning that loose lending has fueled an asset bubble.
The market’s fall during the past two weeks has been drastic: The Shanghai composite has now given up more than a third of the gains it had made since the start of this year.
See also “Dollar rally may be Shanghaied” from the Sydney Morning Herald and “Shanghai, Hong Kong rebound on commodity stocks” from MarketWatch.
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- August 19, 2009 9:16 PM
China Permits First IPO Since September; Brokers Gain
From Bloomberg:
China approved its first initial public offering since September, triggering gains in brokerage shares on speculation the ending of the 10-month moratorium will spur fee income and trading.
Citic Securities Co., China’s largest brokerage by market value, and second-ranked Haitong Securities Co. advanced in Shanghai trading after Guilin Sanjin Pharmaceutical Co. said its IPO will go ahead.
The Shanghai Composite Index has jumped 58 percent this year, reassuring regulators that the market can withstand the increased supply of stock. The China Securities Regulatory Commission stopped allowing public offerings in September after the stock market had plunged 60 percent since the start of 2008.
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- June 19, 2009 4:53 AM
Taiwan, China May Allow Cross-Trading of Stocks
From Bloomberg:
Taiwan and China are planning to permit trading of each others’ shares for the first time as ties improve 60 years after their civil war ended.
A so-called trading platform may list as many as 30 stocks from each market, said Schive Chi, chairman of the Taiwan Stock Exchange. Now, investors are restricted from directly investing in each others’ equities. An agreement on the dual-listing of exchange-traded funds is also expected this year, he said.
“It will be a step further,” Chi said in a May 4 interview in Taipei. “Instead of trading exchange-traded funds, it will be trading individual stocks.”
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- May 6, 2009 8:05 PM
China’s Stocks Gain for Fifth Week on Stimulus Plan Optimism
A rare bit of bright economic news out of China, via Bloomberg:
China’s stocks advanced, driving the benchmark index higher for a fifth week, on optimism government spending plans will revive growth and bolster corporate earnings. Trading surged to the highest in at least three years.
Sichuan Changhong Electric Co. and GD Midea Electrical Appliances Co. surged 10 percent after 21st Century Business Herald said the government plans to invest $88 billion in the electronics industry. China Railway Group Ltd. gained 7.7 percent after winning construction contracts. Aluminum Corp. of China Ltd. jumped 8.8 percent after its parent bought into Rio Tinto Group.
The rally is being “fueled by expectations of additional incentives for various sectors,” said Gabriel Gondard, Shanghai- based deputy chief investment officer at Fortune SGAM Fund Management Co., which oversees about $7 billion in assets. “It will not be sustainable in the long run if we don’t get actual data showing the stimulus plan is effective.”
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- February 15, 2009 11:00 PM
China Mulls Letting Four Brokers Try Margin Trading
From Bloomberg:
Citic Securities Co. and three other brokerages may be allowed to offer loans for stock purchases as China’s government seeks to bolster the market after the benchmark index slumped 66 percent this year.
Haitong Securities Co., Guotai Junan Securities Co. and Everbright Securities Co. may also start margin trading as early as mid-November under a pilot program by the securities regulator, an official with knowledge of the matter said, declining to be identified because the information isn’t public.
The China Securities Regulatory Commission aims to lure investors and expand the nation’s capital market as slumping stock values erode trading. Brokerages may earn 6.6 billion yuan ($966 million) of interest income from margin trading and short selling next year, the Shanghai Securities Journal reported Oct. 6, citing an estimate from Haitong.
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- October 16, 2008 10:55 PM
China Will Test Short Selling, Margin Lending
From Wall Street Journal:
China’s securities regulator said Sunday it would shortly begin a trial program allowing securities firms to engage in margin lending and short selling, long considered necessary to help the country’s stock market mature beyond its repeated boom-bust cycles.
The China Securities Regulatory Commission said in a statement on its Web site that the program would be started, but it didn’t give a timeline. It said the brokerages allowed to participate in the program would be decided based on their net capital size and risk capabilities, among other criteria. The trial would be expanded at some point, it said.
A broker talks on the phone at a brokerage firm in Hong Kong.
Margin trading allows investors to borrow money to buy shares. Short selling allows investors to sell borrowed stocks, typically in a bet that prices will fall.
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- October 5, 2008 8:00 PM
Caution and Reassurance Amidst the Global Financial Crisis
As the U.S. credit crisis ripples through the world economy, Chinese news media and financial institutions alike appear to be taking a calming tone. From the China Daily:
Investors are reeling after the main stock index took a hit from the US financial turmoil last week to fall below 2000 points for the first time in 22 months.
But analysts said the Wall Street crisis might not have much direct impact on the mainland equity market given its limited investment exposure to global capital markets.
There is some correlation between the recent fall and rise on the Chinese stock market and the unfolding US crisis as world economies become more interdependent[...]But external turmoil only sparks psychological panic since the domestic market has limited global exposure, [said Liu Jing, a professor at the Cheung Kong Graduate School of Business]. “The asymmetry between demand and supply in financing and investing is mostly to blame for the turbulence,” Liu said.
The CEO of AIG General China, a subsidiary of the New York-based insurance giant AIG, also emphasized the company’s immunity to the Wall Street turmoil in statements published by the Shanghai Daily:
No job losses, more growth and ample capital – the new president and chief executive officer of AIG General Insurance Co China highlighted these points at his first media briefing yesterday in Shanghai.
John J. Carey, president and CEO of AIG General China, reinforced the stability of the company despite concerns over liquidity surrounding AIG in New York.
Carey said the company’s solvency is “well above” regulatory minimum.
A run on the Bank of East Asia (BEA) in Hong Kong indicated that Chinese citizens were not so immune to panic. The China Daily reports:
Panicked depositors have been waiting outside the bank’s branches in Hong Kong since Wednesday after mobile phone text messages claiming the bank was suffering from financial difficulties began to do the rounds.
According to the same article, however, the run was but a short-lived reaction to false rumors:
Mainland depositors seemed to have shrugged off the “malicious rumor” that Bank of East Asia is in trouble, but analysts say the turmoil is a reminder to local lenders that a perceived lack of communication can trigger chaos at a time of financial uncertainties.
“There is no sign of irregular cash withdrawal in our mainland branches,” said Sun Minjie, executive vice-president of the bank’s mainland subsidiary, at a news conference in Shanghai yesterday. “Still, we have increased temporary liquidity just in case.”
Xinhua also reports reassurances from bank regulators concerning BEA’s solvency:
The Bank of East Asia (China) Ltd. has conducted stable operations on the mainland for several years and its current fundamentals are sound, a banking regulator said on Thursday.
“The China Banking Regulatory Commission supports the judgments of the Bank of East Asia (BEA) by the Monetary Authority of Hong Kong,” Yang Liping, deputy director of the agency’s Banking Supervision Department III, said in a statement.
See also from the China Daily: Depositors calm after HK bank run
Chinese officials’ general confidence in the health of the country’s financial system has been tempered by admonishments for Chinese banks to exercise caution. From Xinhua:
Chinese banks should guard against liquidity risks, market risks and operation risks in response to the U.S. subprime crisis, Liu Mingkang, chairman of the China Banking Regulatory Commission, said on Thursday.
The shareholding commercial lenders also need to actively avert credit risks brought about by the economic slow-down, Liu told a bankers’ meeting in Beijing.
He urged banks to boost corporate governance and internal control, closely watch the major developments in the global financial sphere and improve the ability to predict and avert international risks.
In a more active attempt to cushion the impact of downturn in the global financial system, China’s government has also approved new rules which allow margin trading and short selling on the Chinese stock market. According to MarketWatch:
China has approved a plan to allow margin trading and short selling on its stock markets, according to a media report Friday.
The introduction of the trading rules was timed to limit the impact on market stability, the report cited the official as saying.
[...]The government is backing the plan in the hope it will boost trading without inciting further declines in the market.
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- September 26, 2008 10:31 AM
China in Response to the Financial Crisis
According to Telegraph on Friday,
A promise by the Chinese government to shore up its faltering stock exchange sent share prices soaring in Shanghai.
The benchmark Shanghai Composite Index was up 9.5pc by midday, at 2075.09, with many shares hitting the 10pc daily limit on price increases.
The surge came after an overnight announcement from the government that it would abolish a 0.1pc stamp duty on share trading.
The ministry of Finance also promised that Huijin Investment, part of China’s enormous China Investment Corp sovereign wealth fund, would start buying up the market.
Also from China Daily,
Premier Wen Jiabao said on Saturday China was confident and fully capable of keeping a good momentum of economic growth this year despite domestic difficulties and a global economic slowdown.
But the Telegraph presents another picture of China’s financial performance in the article “Financial Crisis: How the countries are doing”,
Beijing is censoring financial websites over fears that China’s plunging stock market will lead to protests from investors who have seen their life savings evaporate as share prices drop.
The Communist Party’s publicity department is understood to have ordered websites to remove all negative comments and reports about the state of the markets. Anger is rising among ordinary Chinese savers and investors over the failure of the government to protect them from the effects of the global financial meltdown. The Shanghai Composite Index, China’s equivalent of the FTSE 100, has plunged by almost 70 per cent over the past year, as a result of the slumping American economy and rising inflation at home. Over the same period many Chinese have seen the value of their pensions and savings plummet.
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- September 21, 2008 8:48 PM
China, Morgan Stanley, and the Credit Crisis
In the aftermath Wall Street’s credit crisis, observers have looked to China as a potential source of capital to rescue the troubled firms. Reports of negotiations between representatives of Morgan Stanley and China Investment Corp have fed these expectations. As the New Zealand Herald reports:
As regulators work frantically to contain the rot consuming the world’s financial system, it looks likely that a significant portion of the hard cash required to put capitalism back on its feet will come not from the West, where most economies have a dearth of savings, but from the East – including communist China.
Oil-rich Middle Eastern states and fast-growing emerging economies including China possess large pools of state-controlled capital or sovereign wealth funds looking for suitable investments.
With US$3 trillion ($4.4 trillion) estimated to be under management, much of it unallocated, they have emerged as key players in world markets in the past couple of years.
Yet, as the Globe and Mail reports, the Chinese economy is suffering its own problems at the moment, preventing the country from being proactive in the current crisis:
Burned by the flop of previous investments in U.S. finance, China, the richest new player in Asia, is sitting on the sidelines of the current crisis. Instead of rushing to snap up distressed Wall Street assets, its leaders are looking with growing concern at their own, increasingly troubled economy.
China’s central bank is worried enough that it cut its key interest rate on Monday for the first time in six years, abruptly jettisoning its year-long worries about rising inflation.
To help shore up the stock market, which has already fallen 69 per cent since last fall, the government said yesterday that it will scrap the stamp duty on share purchases. It will also direct an arm of its sovereign wealth fund to buy up shares in state-owned banks to reinforce confidence in their stability.
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- September 20, 2008 9:32 PM
China to Purchase Stocks, ‘Backstop’ Market
The Chinese government is taking measures to stop the declines in the stock market, according to Market Watch:
The government said a unit of its sovereign wealth fund will purchase shares in three of its largest banks, according to the state-run Xinhua News. State-owned enterprises will also be encouraged to buy back their own shares, and the current levy on stock purchases will be eliminated.
Central Huijin Investment Co, a unit of the $200 billion China Investment Corp. sovereign wealth fund, will purchase additional shares in the three lenders: Industrial & Commercial Bank of China (HK:349: news, chart, profile) China Construction Bank (HK:939: news, chart, profile) and Bank of China (HK:3988: news, chart, profile) , Xinhua reported.
Authorities did not indicate how much they planned to spend on the purchases, but said operations had begun Thursday.
Also, CITIC is denying rumors that it was going to buy Morgan Stanley amidst the current credit crisis in the U.S., the Guardian reports.
CNBC reported that CITIC Group, China’s largest financial conglomerate and parent of CITIC Securities, was in talks with Morgan Stanley, which is scrambling to seek a buyer as fear grips the financial markets.
“I have no idea if our group is holding any kind of talks on investments in Morgan Stanley but I am sure that CITIC Securities is not in any talks of that kind,” said a CITIC Securities executive, who declined to be identified due to the sensitive nature of the situation.
A representative for CITIC Group could not be reached for comment despite repeated phone calls, but several senior bankers agreed that Chinese interest in buying a major Wall Street bank at this time would be difficult to imagine.
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- September 18, 2008 10:18 PM
Wall Street’s Woes Ripple Around the World
LA Times writers Don Lee and Sebastian Rotella report on the American market crisis affecting China:
As U.S. officials engineered a bailout of insurance giant American International Group Inc. in New York on Tuesday, Lehman [Bros.] workers in London carted boxes from their offices and worried about joining the unemployment rolls. Bankers and accountants in Asia were tallying their exposure to American assets — South Korean financial firms had more than $700 million in investments each in securities linked to Merrill [Lynch] and Lehman.
We’re talking about a global economy that has been driven by extreme excesses created by the housing market in the U.S.,” said Kirby Daley, a strategist in Hong Kong for brokerage Newedge Group. “It was like a drug. But the drug is now gone, and there will be an adjustment.”
In Taiwan, “many banks and life insurance companies had investment in trust bonds of Lehman Bros., and they will be required to cut their investment in it and will suffer quite large losses,” said Kevin Yang, president of Taiwan’s Paradigm Asset Management Co. in Taipei.
Yang’s main worry, though, is Taiwan’s exports. Like much of Asia, Taiwan’s economy has been propelled by growth in China and the seemingly insatiable appetite of American consumers, whose inflated home values had led them to refinance their properties, extract cash and keep up their spending.
See also “In Asia, the Bloom Is Off the A.I.G. Rose” from the New York Times and in The International Herald Tribune’s “Rebound in Asian Markets After AIG Rescue Proves Weak”, Keith Bradsher reports:
Stock markets surged at the opening across much of Asia on Wednesday in response to the U.S. Federal Reserve’s rescue of the struggling insurer American International Group, but the rally began to lose steam by lunchtime on concerns about the U.S. financial system and the Chinese economy.
The CSI 300 index of shares traded in Shanghai and Shenzhen dropped 2 percent by midday as worries persisted about a real estate slowdown in mainland China. The Hang Seng index in Hong Kong was down 1.85 percent at midday after rising 1.7 percent in early trading. while in Singapore, the Strait Times index had dipped 0.5 percent and in Australia, the S&P/ASX 200 index fell 0.3 percent.
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- September 17, 2008 12:32 PM
Chinese Stock Market’s Olympic Specialty: Tumbling
From Los Angeles Times:
Many Chinese investors had hoped the Olympics would give a boost to their nation’s sagging stock market. So far, just the opposite has happened.
The benchmark Shanghai composite index tumbled 5.3% on Monday, falling for the sixth time in seven trading sessions. The index has plunged 15% since the Beijing Games opened Aug. 8, and it now stands at 2,320 — down 56% since the start of the year, making it one of the worst performers in the world.
“Everybody said the market would turn [positive] in July before the Games, so we listened and stayed in it,” said a retired textile worker surnamed Gu, her 70-year-old eyes fixed squarely on the stock tote board at Haitong Securities in Shanghai. “In July, they said that the market’s spirit would return when the Olympics came. What spirit is that? Now we are all dead and have no spirit left in the market.”
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- August 19, 2008 8:43 AM