China’s securities watchdog suspended the launch of new funds late last year in reaction to the surging domestic stock market. The Shanghai Composite Index nearly doubled last year.

Now the China Securities Regulatory Commission (CSRC) has said another two closed-end stock funds have won regulatory approval which brings the total approved since the ban to four.

According to the commission Bank of China Investment Management. and AXA SPDB Investment Managers will launch the funds.

It is suggested the two funds would be launched at ceilings of RMB12 billion ($1.67 billion) and RMB7 billion, respectively.

Bank of Communications Schroder Fund Management confirmed on Friday that a bond fund under its management had also obtained regulatory approval and the fund would be able to subscribe to new offerings.

The previously approved two stock funds, run by CCB Principal Asset Management and China Southern Fund Management would together raise about RMB14 billion.

The launch of these funds is expected to bring a new round of fresh capital into the sliding stock market.
Source: China View

We are certainly going to see a fair amount of this. Changsheng China Property said it will not proceed with its planned Hong Kong initial public offering (IPO) due to market volatility.

Changsheng said it will review its position in regards to relaunching the IPO.

Maoye International, a mainland department store firm, confirmed that it will not proceed with its Hong Kong IPO due to adverse market conditions.

Maoye, based in the southern Chinese city of Shenzhen, said in a statement to the Hong Kong stock exchange today that it will review when to relaunch the sale, which would have been the city’s largest IPO by a Chinese department store operator.

Market sources say alternative energy firm Solargiga Energy and civil engineering firm SFK Construction also put off their share sales. And the list continues.
Source: Forbes and Bloomberg.

China Pacific Insurance, one of the country’s top insurers, could net up to RMB30 billion (US$4.08 billion) from its initial public offering on the Shanghai Stock Exchange.

The price range of its A-share IPO was set at RMB27-30 after a road show that ran from December 7-11 in Beijing, Shanghai, and the southern cities of Shenzhen and Guangzhou.

On the day it was launched it reached the high end of the forecast — RMB30.

The price range translated into a price-to-earnings ratio of 28.06 to 31.18 times. All proceeds from the IPO will be used to increase CPIC’s capital to boost its growth.

An analyst from China Life, who asked not to be identified, said, ‘Demand for the one billion shares was strong amid positive earnings expectations and growth potential for the insurer, because the domestic insurance market is expanding quickly and CPIC has a good sales team and network.’

Analysts have said the shares could rise above RMB50 on their first day of trade on December 25. Which would mean a merry Christmas for the shareholders who got in on the ground floor.

Source: People’s Daily Online

Beijing has agreed to allow foreign firms to issue RMB-denominated securities in China.

China has pledged, under the securities agreement, to allow foreign invested companies to issue RMB-denominated stocks and bonds.

US Treasury Secretary Henry Paulson, seen here, told reporters after the close of the semi-annual Strategic Economic Dialog, ‘There is clearly demand for . . . any company doing business in China and be able to finance yourself in renminbi.’

Henry Paulson provided no timetable for introducing the change, saying only he expected it to be ‘rolled out gradually.’

Other agreements that were reached:

China has agreed to tighter supervision of manufacturers of food and drug products following a spate of product safety scares in recent months.
China has raised the investment quota for foreign institutional investors in China to US$30 billion from US$10 billion.
The two sides will embark on a 10-year period of intensive cooperation on energy issues and the environment.
China and the US pledged greater cooperation on developing biofuels, low-sulfur fuels and other low-pollution fuel sources.
Cooperation on combating illegal logging of timber worldwide to help protect forests and aid the fight against climate change, as trees help to absorb harmful carbon dioxide emissions.

Source: China Confidential

Country Garden, one of China’s biggest property developers, has postponed a planned $1bn-plus global bond issue.

The company, which was getting money from international debt markets for the first time, was offering 10-year US dollar-denominated bonds at a yield of 10% and 5-year bonds at 9.25%. Asian and European investors responded positively, and $1.1 billion in commitments was secured by the end of the first day negotiations were possible.

But the sub-prime problem — read shonky mortgages given by daft lenders — keeps getting bigger. In the United States, at the end of the first day only an additional $100,000 in orders had been secured, prompting Country Garden to cancel its offering.

One comment was, ‘It was probably the worst environment in five years.’

Country Garden was planning on using funds raised to fund new projects and repay short-term loans, but it is probable that will now not happen until next year.

Our picture is of Yang Guoqiang, Country Garden’s founder and chairman, in happier times.
Source: Financial Times

There are various ways of measuring the size of a company and one is market capitalization. On that basis PetroChina is now the biggest company in the world. It is also the first trillion US dollar business.

This came about because the stock was part of an IPO, an initial public offering, on the Shanghai Stock Exchange. The shares were oversubscribed about 50 times and the price immediately soared to 2.6 times the initial offering. (The thought arises that someone should seriously inquire how the stock came to be put on the market at such an under-valued price. And whether there were any major stock sales made before the public offerings were made.)

This is all part of an astounding surge on Chinese stocks where, in a year, share values in Shanghai and Shenzhen have risen 170%.

Using this as a guide the top ten companies in the world now include five corporations owned by the government of China and only three firms from the United States. The two others are the Russian Gazprom and Royal Dutch Shell which is Dutch-British.

However, this is not the time to break out the champagne. If you use another way of measuring you come to different figures.

You work on the number of times earnings in order to find a company’s worth. In publishing, the figure used is typically eleven times although allowances are made for special circumstances. The American Standard and Poor’s measurement. which is widely used although thought by some to be a tad conservative, uses an average of 16 times annual profit.

The leading Chinese index of the top 300 listed corporations has them valued at 43 times earnings.

Or you can look at a seriously canny investor, Warren Buffett. He is always in the top five richest people in the world and is big mates with Bill Gates. He sold out all of his PetroChina holdings. And, not incidentally, made 800% from his initial investment which was around US$488 million. He was attending a conference in Dalian last week and warned that the Chinese share market had become ‘too hot’ even for him.

Ronald Arculli, shown in our illustration, the chairman of Hong Kong Exchanges and Clearing, the company that owns the local exchange, has made no secret of the fact that closer integration with the booming exchanges of Shanghai and Shenzhen — up 120% and 175% respectively this year — and tapping the huge savings of Chinese investors is vital to future prosperity for one of the world’s great financial centers.

In an interim results report for the first half of the year Hong Kong Exchanges and Clearing noted that of 32 listing applications, 23 were from mainland companies.

Mainland listings and relaxed rules on China’s outbound investment have been big contributors to a profit surge for the company: first-half profit more than doubled to about $30 million, compared with the same period last year. Average daily turnover on the exchange was 82% higher than last year.

That is not to say that the idea is welcomed with open arms in China. A report by CLSA Asia Pacific Markets released last month said:

‘There is a sense among some people that Hong Kong can be cast aside as soon as the larger national system gets up to speed, which is why there are sentiments that Shanghai will take over Hong Kong’s role as the premier financial center one of these days.’

On Sept. 7, the Hong Kong government announced that it had lifted its holdings in the Hong Kong exchange to 5.9%. The reason for the acquisition — above a threshold that normally requires regulatory approval — was to support the exchange’s ’strategic development,’ the government said in a statement.

This is a long and interesting article and well worth reading in full. Click on International Herald Tribune below.
Source: International Herald Tribune

Market prices for some top Chinese companies have achieved the status of Gucci or Louis Vuitton in relation to their global counterparts; in many cases, they are the most expensive items on the shelf for equity investors.

Garry Evans, an Asia-Pacific equity strategist at HSBC, detailed this sudden change of pricing power commanded by Chinese stocks, as ‘China Rules the World’.

Going a bit far but in financial circles let there is a lot of truth in the title.

Chinese companies can now claim the world’s largest market capitalizations in banking, insurance, telecoms and airlines. In many other industries — securities brokerages, real estate, oil, and steel — the top Chinese companies lead in global rankings.

China’s largest bank, the Industrial and Commercial Bank of China, has swiped from Citigroup the title of the world’s largest bank measured by market capitalization. ICBC, at $333 billion, is 42% larger than than Citigroup’s $235 billion, and at 29.6 times estimated price-to-earnings ratio it is more than twice as expensive than Citigroup.
At a market capitalization of $246 billion China Life, the world’s largest life insurer by market value, is worth more than any of the largest North American insurers.
In the telecoms industry, China Mobile leads the world with a $346 billion market capitalization. AT&T is 36% smaller.
In aviation, Air China, is worth more than the combined value of two far more respected Asian rivals, Singapore Airlines and Cathay Pacific.

Evans attributed these astronomical valuations to a recent rapid run-up in Chinese stocks. The Hang Seng index — the benchmark for the Hong Kong market, where all the biggest Chinese companies are available to foreign investors — is up by 42% since August’s bottoming out in the midst of the global liquidity rout.
Source: Forbes

Chinese companies will launch a record number of initial public offerings in 2007. Through September, mainland Chinese firms raised $34.6 billion through IPOs in Shanghai and Shenzhen. Other Chinese firms raised $12.4 billion in Hong Kong.

In the U.S., 16 Chinese companies have launched IPOs this year, raising more than $3 billion. The previous U.S. high was 11 in 2004.

Three more Chinese companies plan U.S. IPOs this year: Fuqi International, Noah Education and Longtop Financial Technologies.

Buoyant stock markets — the Shanghai exchange is up 108% this year — have fueled domestic IPOs. Mainland Chinese companies raised more IPO money than any other country last year and will do so again in 2007.

China’s consumers have shifted savings from banks to stocks. Many Chinese firms have invested in the booming stock market to boost earnings.
Source: Yahoo News

Cadwalader Wickersham & Taft has taken the lead role on a key $4bn finance deal in China, advising new client China Southern Fund Management on the creation of the first fund under new regulations.

(Cadwalader is an odd name. Perhaps derived from Cadwaladr ap Gruffydd (c.1096 - 1172) who was the third son of Gruffydd ap Cynan, King of Gwynedd and younger brother of Owain Gwynedd. Or possibly General George Cadwalader, seen here, who was on the Union side in the Civil War. I thought you would like to know these things.)

Cadwalader helped put together a $4bn fund offering for China Southern.

The fund is the first in China to invest solely in foreign equities. This follows new regulations, issued by the China Securities and Regulatory Commission (CSRC) in June, which allow local currency raised from domestic investors in China to be converted into foreign currency for overseas investment.

The fund was over-subscribed, with China Southern raising commitments of $6.6bn.

China Southern is the first applicant to win regulatory approval to invest under the new regulations, although many other investors are also expected to take advantage of the new rules.
Source: Legal Week.com