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Hong Kong stocks end 0.13% lower

Hong Kong shares fell 239.92 points to open below 21,000 points on Friday but their losses narrowed down in the afternoon before closing down 0.13 percent at 21,024.4.
The benchmark index traded between 21,065.73 and 20,766.46 points, with turnover shrank to 56.41 billion HK dollars from Thursday’s 78.69 billion HK dollars.
China Enterprises Index went up 9.23 points, or 0.08 percent, to close at 12,056.48 points.
Among the four major stock categories, the finance sub-index and the commerce and industry were the losers, losing 0.1 percent and 0.32 percent respectively. The utilities rose 0.08 percent, the properties went up 0.37 percent.
Blue-chips closed mixed. Banking giant HSBC Holdings fell 0.73 percent to close at 88.05 HK dollars. Heavyweight China Mobile, by far the largest mobile carrier in the mainland, fell 0.7 percent to 78.3 HK dollars. HKEx, the sole exchange operator in Hong Kong, edged down 0.69 percent, to 143.1 HK dollars.
Local properties also ended mixed. Cheung Kong, the flagship of Hong Kong’s richest man Li Ka-shing, fell 1.37 percent to 97.05 HK dollars. SHK Properties rose 1.43 percent to 113.7 HK dollars. Henderson Land slid 0.9 percent to 49.75 HK dollars.
Mainland-based commercial lenders ended higher in general. Bank of China closed flat at 4.11 HK dollars. ICBC rose 0.51 percent to5.92 HK dollars. CCB moved 0.32 percent up to 6.24 HK dollars.
Chinese insurance shares finished mixed. China Life rose 0.43 percent to 34.6 HK dollars. Ping An fell 0.16 percent to 62.25 HK dollars.
Energy shares closed down, PetroChina dropped 0.99 percent to 9. 02 HK dollars, off-shore oil producer CNOOC lost 0.58 percent to 10.38 HK dollars, while Sinopec Corp fell 0.6 percent to 6.67 HK dollars. (7.8 HK dollars = 1 U.S. dollar)

China Enterprises Index up 0.08% — Sept. 25

Hang Seng China Enterprises Index on Hong Kong Stock Exchange went up 9.23 points, or 0.08 percent, to close Friday’s trading at 12,056.48.
The H-shares index, initiated in August 1994 and readjusted on Sept. 7, 2009, tracks the overall performance of 44 major Chinese mainland state-owned enterprises listed on the Hong Kong Stock Exchange.
Hang Seng China H-Financials Index moved up 24.79 points, or 0.15 percent, to close at 16,416.13.
The H-Financials Index, initiated on Nov. 27, 2006, readjusted on Sept. 10, 2007, tracks the performance of nine major banks and insurers of the Chinese mainland.
Hang Seng Mainland Composite Index went up 3.92 points, or 0.10percent, to close at 3,821.39.
Introduced on Oct. 3, 2001 with the latest readjustment effective on March 9, 2009, Hang Seng Mainland Composite Index gauges the performance of 132 Hong Kong-listed companies with principal places of business in Hong Kong and the Chinese mainland.
Hang Seng China-Affiliated Corporations Index moved down 8.05 points, or 0.20 percent, to close at 3,988.23.
The index tracks the performance of 34 locally listed companies with a significant equity interest held by entities in the Chinese mainland.

L-shaped recovery is likely

 

Richard Burton

Coface, an international credit insurance and credit management services group, in February downgraded its ratings for 22 countries and territories, while putting the two biggest emerging markets – China and Russia – on its negative watch list of A-3 ratings for the first time.
However, with the more positive economic outlook for China, Coface has since kept China’s country rating unchanged, despite almost all other countries having had one or two downgrades since the beginning of the global financial crisis.
The adoption of measures to stimulate the economy and the first half-year’s positive signals (an increase in credit and a return to positive territory of Purchasing Managers’ Index (PMI),) led Coface to maintain the rating, Richard Burton, regional managing director for Coface Greater China, told China Business Weekly reporter Si Tingting.
Coface entered the China market in 2001, setting up Coface (Shanghai) Information Services Co Ltd in Shanghai to provide credit management services for local companies.
In 2003, Coface partnered with Ping An Insurance to offer domestic short-term trade credit insurance to help Chinese enterprises and foreign investment companies mitigate credit risks in domestic trade in China – the first such service in the country.
Burton believes that China has made great advances in regulations and opening its markets since becoming a member of the World Trade Organization. But the current crisis has highlighted certain weaknesses such as an over-reliance on exports and lower value-added manufacturing that are now being addressed.
Q: Coface once estimated that the credit crisis triggered by the global financial crisis might see the bottom by the end of 2009. What is your latest observation on the credit crisis? Coface also once said that among Asia’s emerging countries, China might be the first to show signs of recovery. Why?

A: According to Coface’s latest scenario, the global recession is expected to end in the third quarter of 2009, and the scenario of a weak and slow “L-shaped” recovery remains the most likely.
An inclined L-shaped recovery rests on three types of positive signals. First, some real economy indicators are improving such as retail sales, property and job losses in the United States, and industrial production in some European markets.
Plus, anticipation surveys of investors and consumers are pointing up. Third, financial players are showing a renewed appetite for risk. Our inclined L-shaped scenario is nonetheless dependent on confidence, which is still weak.
Coface projects the 2009 recession at -2.5 percent and sees growth recovering in 2010, settling at 1.7 percent. After having downgraded 22 countries in January and then 47 in April, Coface downgraded 13 country ratings again in July, primarily for small or medium-size economies highly dependent on international trade.
Since the beginning of the crisis, most countries have been implementing measures and stimulus packages to prevent this from worsening. From the latest economic indicators, it can be seen that the contraction has been slowing down.
China has been able to withstand the current downturn with its large reserves through announcing a large fiscal stimulus plan and the loosening of its monetary policy. Compared with other Asian economies, China’s growth performance is relatively strong.

QFII changes target buy-side investors

China’s move this month to relax restrictions on its foreign equity investment initiative reflects growing awareness of the challenges facing the country to attract overseas capital following the global financial crisis.
New draft regulations announced on Sept 4, including a provision to raise the upward limit for individual Qualified Foreign Institutional Investors (QFII) to $1 billion from $800 million, are likely to be followed by more changes to encourage buy-side investors and expand institutional activity.
China’s stock market plunged 22 percent in August, its second-worst monthly performance in 15 years. But the market has since shown more signs of stability, helped by recent policy initiatives.
With the combined quotas for all QFIIs remaining unchanged at $30 billion, the broad market impact of the new rules is expected to be limited. The draft rules have been sent to investors for feedback and likely will be implemented shortly.
But with individual QFIIs being given more investment quotas, shares in sectors they favor have opportunities to out-perform. QFII picks appear to focus on consumption, construction, utilities and financials.
“The QFII relaxation comes after the performance of China’s stock market lagged its US counterpart since late July amid signs that capital is flowing into mature economies due to their stronger-than-expected recovery,” said Chen Lu, chief economist at Haitong Securities in Shanghai.
Market watchers said that foreign funds have fled China’s market since it tumbled in August.

The quick exit means foreigners no longer believe, as they did during China’s market peaks in 2006 and 2007, that a bull run in Chinese stocks can last for years – a shift in attitude after China’s economy proved vulnerable to the global crisis, as well.
The new rules will also lower the minimum required quota to $20 million from $50 million and cut the lock-up period for insurance funds, pension funds and open-ended funds to three months from one year, among other reforms.
Several QFII managers said that such relaxations reflect, in part, regulators’ efforts to introduce more buy-side investors to help stabilize China’s ever-volatile stock market.
“Most QFIIs are now brokers using funds they have raised to invest in China,” said Wu Haijun, Shanghai principal at Power Pacific Corp of Canada, a QFII investor in Chinese stocks.
“Funding channels for those brokers are not always stable. Some might not be able to assume the role of stabilizer in case of market volatility. By lowering the minimum quota requirements and other steps, China apparently hopes to diversify QFII investors,” Wu said.
Long-term QFII-friendly steps might include quotas and other preferences for those who invest in Chinese stocks with their own funds, and an eventual expansion of total quotas for QFIIs.
Fan Jianjun, head of the securities research unit at the Development Research Center of the State Council, said QFII reforms were part of official measures to bolster the stock market.
“But it will have a more symbolic than real impact on the market because QFIIs’ capital base is really too small,” Fan said.
China has so far granted only about $15 billion of the total $30 billion investment quotas for QFIIs.
These figures are less than 1 percent of China’s combined stock market capitalization of $3.1 trillion for the mainland’s Shanghai and Shenzhen stock exchanges, where QFIIs are investing.
But traders said investors could still add positions in sectors likely to be favored by QFIIs, because their buying with additional quotas might help these sectors outpace the market. QFIIs typically decline to discuss stock picks.

Chinese shares drop 2.65%, dipping below 2,800 mark

Chinese equities continued the downward trend and dropped 0.52 percent in light trade Monday, dipping below the psychologically important 2,800 mark, amid investors’ wait-and-see attitude, dealers said.
The Shanghai Composite Index on the Shanghai Stock Exchange closed at 2,763.53 points Monday, down 75.32 points, or 2.65 percent, from the previous close.
The Shenzhen Component Index on the Shenzhen Stock Exchange closed at 11,086.71 points Monday, down 297.45 points, or 2.61 percent.
Combined turnover shrank for a fifth day to 118.5 billion yuan (17.35billion U.S. dollars) from 129.33 billion yuan of the previous trading day.

Chinese shares drop 0.33% Tuesday

Chinese equities continued the downward trend for the third consecutive trading day and lost 0.33percent in light trade Tuesday, amid investors’ wait-and-see attitude.
The Shanghai Composite Index on the Shanghai Stock Exchange closed at 2,754.54 points Tuesday, down 8.99 points, or 0.33 percent, from the previous close.
The Shenzhen Component Index on the Shenzhen Stock Exchange closed at 11,069.28 points Tuesday, down 17.43 points, or 0.16 percent, from the previous close.
Combined turnover shrank for the six consecutive trading day to117. 5 billion yuan (17.2 billion U.S. dollars) from 118.5 billion yuan of the previous trading day.
The market has ended its liquidity-driven rise momentum and the future trend largely depends on the economic recovery situation, according to Bosera Funds, a leading domestic fund management company based in Shenzhen.
Analysts said that the current A-share stock price is no longer cheap and further rise should be based on companies’ increasing profitability.
Experts also attributed the recent market drop to the subscription of first batch of ten IPOs on the upcoming growth enterprises market (GEM), which is expected to freeze billions of yuan.
Ten Chinese companies would finish their initial public offering (IPO) procedures and are expected to start trading on Shenzhen Stock Exchange after the National Day holiday running from Oct. 1 to 8.

China boosts int’l use of RMB with sovereign bond sale in HK

The launch of Renminbi sovereign bonds in Hong Kong on Monday shows China’s efforts to boost the international use of the yuan step by step, officials and analysts said.
The bond issue, worth only 6 billion yuan (878.5 million U.S. dollars), marked a key milestone in the internationalization of the RMB.
Hong Kong was chosen for, and will benefit from, the milestone bond sale thanks to its unique position as the international financial center providing desired cushion against the potential risks when the program was launched, analysts said.

BOOSTING INTERNATIONAL USE OF RMB
The bond issue in Hong Kong came earlier than expected, said Hu Yifan, an economist with CITIC Securities.
“The need for the RMB to go international and convertible has been growing along with the increasing importance and openness of the Chinese mainland economy and the risks arising from over- reliance on the United States dollar as the reserve currency,” said Tse Kwok-leung, head of economic research of Bank of China ( Hong Kong) Limited.
China has been launching pilot RMB programs over the years, but the pace has obviously quickened since the onset of the global financial crisis. Pilot RMB programs launched in Hong Kong over the past 12 months also included yuan-denominated cross-border trade settlement and trade financing, yuan bonds issued by policy banks, commercial lenders and the branches of foreign banks, and currency swaps.
The sovereign bond issue would help “boost the international use of the RMB in a steady and orderly manner,” the Chinese Ministry of Finance quoted Acting Chief Executive of the Hong Kong Special Administrative Region (HKSAR) Henry Tang as saying.
The sovereign bond sale in Hong Kong serves the purpose of water testing to “see how it is received by international investors.” Hong Kong has a unique strength in that it provides the desired cushion against potential risks when the pilot programs were launched, given that the mainland capital market was yet to open up, Tse said.

BOOSTING NASCENT BOND MARKET IN HONG KONG
The bond issue ahead of the Chinese National Day showed the central government’s support for Hong Kong, Vice Minister of Finance Li Yong said.
It will help Hong Kong build on its strength as an international financial center by boosting the nascent bond market in Hong Kong, Tse Kwok-leung said.
“It calls for a banking system, a stock market and a bond market, all developed, to make a developed international financial center,” Tse explained.
Hong Kong has been aspiring to be the leading international financial center in the Asian time zone.
Government statistics showed that the total assets of Hong Kong’s banking system and the size of its stock market were both about six times its gross domestic product, compared with a bond market equivalent to 43 percent of its gross domestic product.
Bonds issued in Hong Kong in 2008 totaled 424.4 billion HK dollars (54.4 billion U.S. dollars), with 67 percent issued by the Hong Kong Foreign Exchange Fund, which was established to defend the Hong Kong dollar peg to the U.S. dollar.
The other 33 percent were accounted for by development banks from outside Hong Kong and corporate bonds issued by local players. There were no sovereign bonds.
Tse said the bond issue will also help improve the liquidity of, and diversify, the local bond market. It will also improve the operation of the RMB bond market in Hong Kong by helping find the benchmark interest rate in the local market.
Tse said the demand for sovereign bonds issued by an economy as strong as the Chinese mainland was huge, given the impact of the global financial crisis on the corporate bond market.
Vice Minister of Finance Li Yong also said he believed the bonds will be well received.
“I believe the RMB sovereign bonds will prove popular with investors looking for safe and prudent investments. I definitely think it will be successful,” Li said.