As expected, cost pressures dragged fourth-quarter China restaurant margins down to 15.8 percent from 18.2 percent a year earlier.

Yum wants to bring margins up to around 20 percent for all of 2012 and plans to use higher prices to offset inflation in food prices, labor costs and other items.

Yum also plans to bolster growth by adding another 600 restaurants in China, where its brands include KFC, Pizza Hut, East Dawning and Little Sheep. The additions would bring Yum’s restaurant count to about 5,100.

While Yum’s operations in China and other developing countries have made it a top pick for international investors, the company’s U.S. division has underperformed.

Despite the growth of fast food’s popularity and an increase in consumer spending on things like KFC and Coca-Cola, there are also fears about China’s slowing housing market, which may lead to mixed messages on China’s economy. CNN Money reports:

Coca-Cola (KO, Fortune 500) said Tuesday morning that its profits topped estimates, helped by a 10% jump in volume in China. Emerging markets are a key focus for Coke as the beverage market matures in the U.S.

However, even if the emerging middle class in China is acquiring more of a taste for some of the top Uncle Sam brands, that may not mean that the Chinese economy overall is impervious to potential pain.

One of the biggest concerns facing China is whether or not its real estate market is a bubble along the lines of what happened in the United States in those naughty Aughties. And there is some evidence that the Chinese housing market is cooling … perhaps faster than the government there would like.

On the one hand, you might be able to spin the housing weakness in China as a good thing. It may mean that China’s central bank, which was aggressively raising interest rates and reserve requirements for banks over the past few years to fight inflation, succeeded in killing any asset bubbles.

© Melissa M. Chan for China Digital Times (CDT), 2012. | Permalink | One comment | Add to del.icio.us
Post tags: Coca-Cola, fast food, housing market, kfc, stock market
Download Tools to Circumvent the Great Firewall

The Hang Seng Index rose 0.1 percent to 18,080.20 at the close, with about five stocks declining for every four that rose in the 48-member gauge. The volume of stocks traded was about 40 percent less than the average over the past 100 sessions, according to data compiled by Bloomberg. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong gained 0.1 percent to 9,740.01.

“There’s some recovery as the market sentiment stabilizes after the panic yesterday on Kim’s death,” said Ben Kwong, chief operating officer at KGI Asia Ltd. “Riots or instability aren’t surfacing at the moment.” The Hong Kong gauge is “down to a relatively low level, so there’s bound to be some bargain hunting, but if you look at the turnover, liquidity is still not ample enough to create an upward trend.”

The Hang Seng Index slumped as much as 2.5 percent yesterday on news of Kim’s death. The gauge fell 22 percent this year, led by banks and developers, as China took steps to curb inflation and property prices, and on concern Europe’s debt crisis will spread. Companies in the gauge traded at 9.8 times forecast earnings, down from 14.4 times on Dec. 31, according to data compiled by Bloomberg. The Standard & Poor’s 500 Index trades at 12.2 times.

The Hang Seng Index and the Shanghai Composite Index are among the worst performers in 2011 in Asia. While the Hang Seng was able to rebound, the Shanghai Composite continues to drop. Reuters adds:

In Shanghai, trade was also choppy largely due to weak A-share turnover. The Shanghai Composite Index reversed early gains to finish down 0.1 percent at 2,215.9 points.

Market watchers expect the Shanghai Composite could now see near-term support at about 2,200, the 76.4 percent Fibonacci retracement of its rise from its 2005 low to 2007 peak and a level it has now finished above for three straight sessions.

On Tuesday, weakness in financial shares outweighed strength in property ones. The Shanghai financial sub-index declined 0.3 percent, while a similar gauge for the property sector gained 0.1 percent.

See also China stock market faces 4 day slump via CDT.

© Melissa M. Chan for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: Hang Seng Index, Hong Kong, hong kong economy, Hong Kong stock market, Kim Jong-il, Shanghai, Shanghai Composite Index, stock market
Download Tools to Circumvent the Great Firewall

China’s Shanghai Composite index was down nearly 2% this morning to 2248.59, its lowest level since March 2009 and its fourth straight decline, on worries about its slowing economy and an export-crimping recession in Europe.

The Shanghai Composite has lagged the S&P 500 consistently since late August, tumbling more than 300 points while the US index has managed (with some ups and downs) to rally nearly 100 points.

The decline in the stock market comes amid a slump in the housing market and the European debt crisis, and there reports that predict that tax cuts will be necessary for to improve economic growth. Bloomberg adds:

Chinese housing transactions declined in 27 out of 35 cities tracked by Soufun Holdings Ltd. during the week of Dec. 5-11, according to the operator of the nation’s biggest real- estate website. Transactions fell more than 60 percent in at least 4 cities, including Tianjin and Hangzhou, it said.

China may use tax cuts to shore up expansion in the second- largest economy next year as export growth weakens and the threat of bad loans from stimulus spending narrows the government’s options. The nation’s top officials are mapping out policies for 2012 at the annual Central Economic Work Conference in Beijing. The event started yesterday, according to the state- run Xinhua News Agency.

“China is no longer able to rely on massive investment in infrastructure building to stimulate the economy,” said Yao Wei, a Hong Kong-based economist with Societe Generale SA. “Tax cuts are unavoidable.”

The nation’s economic growth may “hit its bottom” in the first and second quarters next year, China Securities Journal reported, citing Ba Shusong, a researcher at the State Council’s Development Research Center. There may be moderate rebound in the third and fourth quarter and growth may be more than 8 percent next year, it said.

© Melissa M. Chan for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: economic slowdown, stock market
Download Tools to Circumvent the Great Firewall

At a news conference Monday in Beijing, prosecutors said the two men had profited by sharing confidential data, from the country’s economic growth rate to retail sales and inflation numbers.

The government said the leaks had allowed people in the securities industry to engage in a form of insider trading in Chinese stocks because they had had an unfair advantage over others in the market. But Chinese economic data could also have an effect on prices of stocks in Hong Kong and overseas markets.

Li Zhongcheng, a deputy director in the state prosecutor’s office, said at the news conference in Beijing that the leaks “disrupt fair market competition, affect the government’s credibility and cause huge losses to the interest of the country, society and the people.”

China has struggled to keep a lid on key data and protect the credibility of its stock market for years, and this summer it began to accelerate the reporting of statistics in an effort to reduce leaks. Today’s punishments represent the toughest action yet and, hopefully, a clear deterrent against future disclosures of secret information. From Bloomberg:

“It’s like killing the chicken to scare the monkeys,” he said, using a Chinese idiom. “It’s also aimed at those who dig for information and manipulate the stock market.”

The consumer-price index figure was accurately circulated in the market or in the press before the official release for at least five of the six months through April this year.

Such early disclosure has helped move markets in the world’s second-biggest economy.

After rumors circulated on the Internet in February that inflation for the previous month would be a lower-than-forecast 4.9 percent, China’s benchmark Shanghai Composite Index rose 2.5 percent, the most in two months, on speculation China wouldn’t need to raise interest rates further to cool rising prices. After the statistics bureau’s official release a day later, which matched the number, the market ended almost unchanged.

See also previous CDT coverage of Chinese state secrets, including the compromised confidentiality of its nuclear power industry and the detainment of a journalist for exposing the cover-up of a crime by local officials.

© Scott Greene for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: economic data, information leak, state secrets, stock market
Download Tools to Circumvent the Great Firewall

The China Banking Regulatory Commission is putting heavy pressure on banks to raise capital. The regulators want to prepare banks to meet rising international standards for capital adequacy and to strengthen the banks’ balance sheets against possible losses on big loans issued to Chinese companies and local governments during China’s economic stimulus program in 2009 and 2010.

The Agricultural Bank of China, one of the four main banks that together control two-thirds of the Chinese banking market, has already said that it intends to raise more capital next year. And investors have been watching for moves to sell shares by the other three: the Industrial and Commercial Bank of China, China Construction Bank and the Bank of China.

“One of the things depressing the share prices is that the existing public shareholders worry that they’re going to get diluted,” said Nicholas R. Lardy, a senior fellow at the Peter G. Peterson Institute for International Economics in Washington.

China Daily credits the latest purchase in lifting the market yesterday:

“The purchase by Central Huijin may trigger a short-term market rally as it indicates that the biggest shareholder of the banks believes that current prices are low enough to buy,” said Zhang Qi, a Shanghai-based analyst at Haitong Securities.

“But it’s still too early to say that the general market has bottomed out given the weak outlook of the domestic economy and the uncertainties in the global markets.”

The benchmark Shanghai Composite Index continued to slump on Monday, closing at 2,344.79 points with merely 40 billion yuan ($6.29 billion) turnover, compared with nearly 200 billion yuan in late March. The Shanghai index has declined 18 percent this year on investor concern over the financial turmoil in Europe and the US.

© zhou shuren for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: Agricultural Bank of China, Bank of China, China Banking, china construction bank, Industrial and Commercial Bank of China, Shanghai Composite Index, Sovereign Wealth Fund, stock market
Download Tools to Circumvent the Great Firewall

Q: You are bullish about China’s future. Why is that? Do you see any setbacks in the next 10 years?

A: … The only thing I worry about is water.

China has one of the worst water problems in the world. Unless you solve your water problem, there’s no China story. I’ve been around the world a couple of times, I’ve seen whole cities, societies and countries disappear because of water problems.

The amount, quality and supply of water could lead to the end of China’s story if the problem is not solved in time.

Q: What do you think of the yuan and China’s currency policy?

A: I think it’s better for China to open its currency market as soon as possible. This is not 1981; this is 2011. China is a strong and independent country now, and they don’t have to worry about the currency. It would be good for China and the 1.3 billion Chinese. Everything China imports will go down in price. You have to have a convertible currency to have a strong international economy. China is doing it but I think they could do it faster ….

Q: Apart from gold and silver, what else do you think is worth investing in China?

A: All commodities and the Chinese yuan. If China collapses and the stock market has a big drop, I hope I’m smart enough to buy more Chinese shares. My approach to China is that my children are going to own my Chinese shares some day. I don’t do this in any other country. Only China. I hope one day my grandchildren are gonna say that the old man was really smart … wherever he is, thank you.

© Samuel Wade for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: economic problems, finance, stock market, water crisis, yuan value
Download Tools to Circumvent the Great Firewall

Yanzhou Coal Mining Co. led declines among coal producers on speculation the temblor will curb industrial production, reducing demand for the fuel from Japan manufacturers. Dongfang Electric Corp., which derived 6.5 percent of sales from nuclear power-related products in 2009, fell 5.7 percent. Ping An Insurance (Group) Co., the nation’s second-biggest life insurer, slid to a two-week low after selling shares to boost capital.

“Investors are worried about the situation in Japan as the blast at the nuclear plant makes it a regional risk,” said Zhou Xi, a strategist at Bohai Securities Co. “It’s not about the earthquake but more about radiation leakage concerns which will drag down the economy in Japan and even the whole of Asia.”

The Shanghai Composite Index, which tracks the bigger of China’s stock exchanges, tumbled 63 points, or 2.1 percent, to 2,874.63 at the 11:30 a.m. break. The CSI 300 Index (SHSZ300) slid 2.6 percent to 3,177.60, with all 10 industries falling more than 2 percent.

Read more about the risks of radiation in Japan, via the Beijinger.

© Sophie Beach for China Digital Times (CDT), 2011. | Permalink | No comment | Add to del.icio.us
Post tags: Japan earthquake 2011, stock market
Download Tools to Circumvent the Great Firewall

Mainland Chinese and Hong Kong shares fell sharply in early Wednesday trading after the central bank surprised markets a day earlier with an interest-rate increase.

Property developers and commodity shares were hit the hardest, but banks outperformed on hopes the rate increase would improve their interest-rate margins.

The Shanghai Composite Index /quotes/comstock/16k!i:000001 (CN:SHCOMP 3,021, +19.57, +0.65%) dropped 1.3% and the Shenzhen Composite Index slid 0.7%, a day after the People’s Bank of China raised both the one-year lending and deposit rates by a quarter-point, to 5.56% and 2.5%, respectively. In Hong Kong, the Hang Seng Index /quotes/comstock/08s!i:hsi (HK:HSI 23,619, -144.55, -0.61%) lost 1.9%.

China’s rate hike is a positive signal for global growth, investment strategist Michael Yoshikami tells MarketWatch’s Laura Mandaro.

The drop came amid fears that more rate hikes could come later on down the line. Several economists, including those at Deutsche Bank, Barclays and Standard Chartered, said the rate increase likely marked the beginning of a tightening cycle in China.

And the Wall Street Journal’s China Real Time blog gets bankers’ perspectives on the move.

© Sophie Beach for China Digital Times (CDT), 2010. | Permalink | One comment | Add to del.icio.us
Post tags: interest rates, stock market
Download Tools to Circumvent the Great Firewall

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.

© Sophie Beach for China Digital Times (CDT), 2009. | Permalink | No comment | Add to del.icio.us
Post tags: ChiNext, stock market
Download Tools to Circumvent the Great Firewall

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.

© Sophie Beach for China Digital Times (CDT), 2009. | Permalink | No comment | Add to del.icio.us
Post tags: andy xie, economic bubble, stock market
Download Tools to Circumvent the Great Firewall