Top Chinese e-commerce firm Alibaba.com full-year 2007 profit grew 340 percent, boosted by a buoyant Chinese economy, increasing Internet access in the country and healthy growth in the firm’s number of paying members. And the genius of Jack Ma.

Alibaba.com, an online business-to-business site connecting companies looking to import and export Chinese goods, was founded in 1999 as a bulletin board for businesses to post trade leads.

Last year, Alibaba had a 57.3% share of China’s RMB3.9 billion business-to-business market.

Alibaba, in which U.S. Internet company Yahoo is a key investor, reported a profit of RMB967.8 million ($136.7 million) for the year to the end of 2007, compared with RMB219.93 million a year earlier.

Our illustration shows Alibaba.com founder Jack Ma giving the thumbs-up at the Hong Kong stock exchange on a previous occasion. He is damn well entitled to. The fact that the share prices go up and down is due to the vagaries of the stock market, not the soundness of the business.
Source: Reuters

The official Shanghai Securities News reports, citing sources, that the China Development Bank, one of the country’s three policy banks, is planning to invest over RMB7 billion in Shenzhen Financial Leasing, taking a 90% stake in the latter.

The capital injection will make SFL the largest financial leasing firm in China.

Shenzhen Financial Leasing currently has registered capital of RMB716 million, with Hainan Airlines Group the largest current shareholder with a 21.66% stake.

Xi’an Aircraft Industry, the parent of Xi’an Aircraft International, also owns 18.16% of Shenzhen Financial Leasing.

In October 2007, State Grid, one of China’s two state-owned power transmission firms, said it was selling its 3.21%t stake in Shenzhen Financial Leasing for a minimum of RMB16.10 million.

State Grid said in a statement to the Shanghai United Assets and Equity Exchange that Shenzhen Financial Leasing reported a 2006 net profit of RMB11 million, compared with RMB1.26 million a year earlier.

In January 2007, China’s banking regulator issued new rules permitting qualified local and overseas-incorporated commercial banks to apply to set up directly-controlled lease finance companies. Leading domestic lenders including Industrial and Commercial Bank of China , China Construction Bank and Bank of Communications all of which have since established lease financing units.

China Development Bank has reportedly won central government approval to restructure itself into a commercial bank. The bank is expected to bring in strategic investors ahead of going public.
Source: Forbes

Chinese share prices closed about 7% lower as investors dumped stocks after last week’s sell-off on Wall Street amid lingering fear of a US recession.

On Friday, the Dow Jones Industrial Average fell 1.38% to 12,207.17, ending a two-day rally boosted by the US Federal Reserve’s emergency federal funds rate cut of 0.75 percentage points.

China’s main stock index plunged 7.19%, its fourth biggest drop this decade, because of sliding global markets and heavy snow across central and eastern China, which is disrupting food and energy supplies.

The benchmark Shanghai Composite Index, which covers both A and B shares, plunged 342.39 points. The fall neared last Tuesday’s 7.22%drop, the highest percentage points loss in 7.5 months.

A Bohai Investment analyst said the once isolated domestic market was now more influenced by other world markets.

He added there was little buying interests as investors expected the US subprime mortgage crisis wouldn’t be tackled in a short time.
Source: China Daily

China’s world-beating rally might be a “bubble” ready to burst, said Alan Greenspan, the former U.S. Federal Reserve chairman, and he is supported in this view by Li Ka-shing, Asia’s richest man. The billionaire investor Warren Buffett, chairman of Berkshire Hathaway, last month urged investors to be ‘cautious.’

Tim Leung, a fund manager at IG Investment in Hong Kong, said, ‘If there is a slump in China, the risk of investing in some companies whose earnings are closely linked to the market will increase. When there is a slump in the market, retail investors do much less trading.’ Tim Leung said he did not own China Finance shares.’

All this because China Finance Online may lose its rank as the best-performing foreign company listed in the United States.
American depositary receipts for the company, China’s biggest provider of online financial data, have dropped more than 30 percent this month, as the nation’s benchmark CSI 300 index fell 12%.

Li Ka-shing, chairman of Hutchison Whampoa, said in May that the Chinese stock market ‘must be a bubble.’

Asked if China was in a state of ‘irrational exuberance,’ Greenspan told a conference of insurance executives in Boston on Oct. 30: ‘I think so.’
Source: International Herald Tribune

The Shanghai Stock Exchange is considering listing large multinational companies.

Que Bo, assistant general manager of the Shanghai Stock Exchange, told a conference on China’s capital market that the stock market was ‘doing market research for the plan and will get some results soon. To strengthen the blue-chip market, we have been planning to list such multinationals as HSBC, Coca-Cola and Siemens, which have developed very well in China.’

Que Bo said the Shanghai Stock Exchange would continue to lure more large domestic firms into the market and draw Hong Kong H-shares and Chinese firms registered and listed in Hong Kong, better known as red chips.

He also said the exchange would not only expand but also strengthen the blue-chip market, which was essential to sharpening the competitive edge of China’s capital market. In addition to the Hushen 300 index futures, the Shanghai Exchange planned to introduce more financial derivatives to bolster the blue-chip market.
Source: Windows of China

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

China will launch stock index futures soon and is ready to approve new quotas for foreign investors in the country’s red hot stock markets. The launch date has yet to be decided.

This will not be easy. Zhou Qinye, seen here, executive vice president of the Shanghai Stock Exchange, the bigger of mainland China’s two bourses, told a financial forum that the start of futures trading might initially increase selling pressure on the cash market.

He did not elaborate on the exact timing of the launch but added that conditions were ripe for a stock futures market and preparations had been made.

China is trying to develop a stock futures market to give investors more options and help them hedge risk.

The introduction of futures has been delayed, partly because of concerns that it could destabilize the stock market.

Zhou Qinye said, ‘China’s stock market is still an emerging market that is in the process of transformation. So you will see lots of new things to happen during the process.’

China’s main stock index has more than doubled so far this year, while Chinese companies have turned in explosive profit growth in the January-September period.

Zhou Qinye said Chinese regulators had started the process of approving new quotas for foreign investors in an effort to diversify the types of active investors. But Beijing’s approval process would be ‘gradual’.

However, the eventual launch of China’s stock index futures could happen before the end of this year.
Source: Reuters

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.

Although one knew of the growth and growth of China and its exports it comes as a surprise to read that China Life Insurance has passed AT&T in market value, giving China five of the world’s 10 largest companies. The United States only has three.

Allowance must be made for the fact that many, most?, of the world’s financial analysts says China’s stock is overvalued but it it nevertheless astounding to see that in the area by which the United States judges the rest of the world — the stock market — China reigns supreme.

China’s stock rally has almost tripled its benchmark index this year. China’s households are pouring more of their $2.3 trillion savings into shares to beat inflation, which exceeds the return on bank deposits, and to profit from the world’s fastest growth among major economies.

Beijing-based China Life, the nation’s largest insurer, gained 1.1% in Hong Kong and added 6.7% in Shanghai valuing the company at RMB1.94 trillion yuan, or $259.1 billion.
China Life, PetroChina Co., China Mobile, Industrial and Commercial Bank of China and China Petroleum and Chemical are now in the list of the world’s 10 biggest companies by market value.
However, as an indication to the skew in valuations only two of those are in the top 50 by sales.

The CSI 300 Index, which tracks shares traded on the Shanghai and Shenzhen stock exchanges, has risen 170% this year, the best performance among 90 global benchmarks tracked by Bloomberg. Hong Kong’s Hang Seng Index, which is dominated by Chinese companies, has gained 58%.

Only China Petroleum and Chemical, or Sinopec, and PetroChina are among the world’s biggest 50 companies by revenue.

Investors pay 78 times estimated full-year profit for China Life in Shanghai and 42 times in Hong Kong. That compares to 9.3 times for New-York-based American International Group, the biggest U.S. insurer, and 8.4 times for Europe’s largest, Munich-based Allianz.

China’s CSI 300 benchmark is valued at 43 times estimated earnings, compared with the average 29 times for Chinese companies on the Hang Seng China Enterprises Index, according to data compiled by Bloomberg. In the U.S., home to the world’s biggest stock market, the S&P 500 Index is valued at 16 times.

Fraser Howie, co-author of the book Privatizing China: The Stock Markets and Their Role in Corporate Reform, said, ‘Chinese companies are far too expensive from any rational measure. It’s a bubble and in a bubble things are priced wrongly.”

Leslie Phang, who helps manage $1 billion at Commonwealth Private Bank in Singapore, said, ‘It’s pretty unnerving. It’s all building into one big bubble. The Chinese companies are trading on euphoria.”

On the other hand Marc Faber, who manages $300 million at Marc Faber Ltd. in Hong Kong, said, ‘European countries were also surprised at the beginning of the 20th century when American companies overtook European companies. The world better get used to it.’

Source: Bloomberg

Australia Treasurer Peter Costello has warned of a ‘huge tsunami‘ set to engulf global financial markets, in his strongest bid yet for the Australian Reserve Bank not to raise interest rates.

To understand this you need some background. John Howard, the Prime Minister of Australia is facing an election. It will be a damn close run thing and the betting is he will lose. Peter Costello is treasurer and John Howard’s probable successor. If John Howard loses this election Peter Costello is archives.

For the Reserve Bank to raise its rates does not help the party in power to stay in power. This means higher mortgages and this is not a good thing for a sitting party.

Peter Costello said the Chinese economy would at some stage unleash even greater instability on global markets than the United States had with its sub-prime crisis. This is a little difficult to follow but remember this is an election speech and logic is never a strong point.

Peter Costello said, ‘That will be a wild ride when that happens. That will set off a huge tsunami that will go through world financial markets.’

And there will be another tsunami when Peter Costello finds his party has lost the election and, as a direct result, know for certain he will never be the prime minister of Australia.

It is, indeed, possible, China faces some interesting financial times. They will not be caused by Australia which, incidentally, in head count has the same population as Shanghai.
Source: News.com