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Investors in China’s main financial district are talking about the following before the start of trade today:
Buying interest in Chinese shares this week may be dampened by worries about the fallout from Europe’s debt woes, the impact of a big mainland IPO on market liquidity, and closing of positions ahead of the upcoming long National Day holiday starting Oct. 1.
Shanghai and Hong Kong benchmark stock indices fell on Friday amid a broad international selloff last week amid worries about the deteriorating outlook for global growth. Shanghai’s benchmark index lost 0.4%, declining to a 14-month low of 2433.16. In Hong Kong, China’s biggest banks were among the most actively traded stocks and hit hard: ICBC dropped 4.6%, China Construction Bank lost 2.1% and Bank of China fell 3%.
China’s economy grew by 9.6% in the first half, but it will be hard to avoid fallout from global trouble in the second half, Tan Wen Qing, a partner at Oriental Fortune Capital of Shanghai said in an interview on Friday on the sidelines of a Forbes China forum in Kunshan. (See interview in Mandarin here.) Earlier this month, the Asian Development Bank trimmed its forecast for China’s GDP for 2011 to 9.3% from 9.6%.
One upside for Chinese stocks from weakening global demand may be that policy makers in the country will increasingly have room to ease interest rates, J.P. Morgan Securities (Asia Pacific) managing director Frank Gong said in a speech at the same Forbes China gathering. (Click here for his Mandarin talk.) In a possible sign of things to come, the China Securities Journal noted in a front-page story today that the increase in China’s consumer price index in September would likely decline from August. Another hopeful area: the country’s closely watched consumer-related industry as a whole will continue to hold its own in the near term despite wider global macroeconomic trends, says Ying Lee, managing director of YF Capital. Lee also spoke in an interviewon the sidelines of Forbes China’s conference. In a sign of confidence about its own prospects with Chinese consumers, Apple opened its third store in Shanghai on Saturday.
Although inflation may be poised to ease, the same Chinese Communist government which engaged in central planning for decades before adopting some market reforms three decades ago is continuing to try to force companies here not to raise prices, according to local media. Domestic shares in Kweichow Moutai, distiller of one of China’s best-known brands, and other spirits makers fell on Friday after an industry group last Wednesday called on leading suppliers not to raise prices. The association statement followed a meeting with the Cabinet’s main economic planning body earlier this month.
An A-share IPO this week by China Sinohydro, one of China’s largest IPOs this year, may sap funds from the stock market at a time when sentiment is low, and is being viewed warily by investors. China’s largest dam construction company said on Friday it is looking to sell 3 billion shares at 4.5-4.8 yuan each; the size of the offering is less than the 3.5 billion shares the company said earlier this month it hoped to sell.
Chinese property developers whose shares have largely been weak for months fell anew on Friday on worries about access to loans. Hong Kong-traded Greentown China Holdings of Hangzhou plunged 7%. Cyclical metals stocks whose profits are affected by overall global demand such as Shanghai-listed Jiangxi Copper fell 3.3% on Friday to 28.12 yuan.
Although fund managers on the whole expect Chinese consumer spending to hold up amid the currently international economic tumult, not every consumer-related share is doing well. Hongguo International, a Chinese women’s footwear retailer that moved its listing to Hong Kong from Singapore, had a rough debut there on Friday, plunging 15% from its IPO price. The China IPO market has turned weak as international shares have tanked recently. Popular Shanghai restaurant chain Xiao Nan Guo halted its IPO last week, citing market conditions. Hongguo listed in Singapore in 2003 and delisted on 2010.
In U.S. trading on Friday, shares improved on hopes that the situation in Europe will stabilize. Volatile Chinese shares were mixed after recent losses. Web video site Youku rocketed 20% amid reported speculation that it might be a takeover target. Social media Renren gained 5% to $5.27, still leaving its shares off nearly 80% from a post-IPO high of $24 earlier this year. China Mobile rose 1% overnight in New York after falling 2.8% in Hong Kong on Friday, suggesting some support in Hong Kong today.
In the media industry, shares in Hong Kong-traded magazine publisher Modern Media rose by 0.4% on Friday after the company announced two agreements with overseas companies. Among the two, the company said a subsidiary had reached a licensing agreement with the Economist magazine to reprint content in Chinese. (See story here.)
Besides Apple, multinationals have been increasing their investments in China as growth slows at home. Ford said this weekend it would invest in a $350 million joint venture transmission plant in Chongqing with Changan Automobile Group. Shenzhen-listed affiliate Chongqing Changan Automobile gained 0.5% to 4.17 yuan on Friday. And Citicorp opened a business in Chongqing.
source: forbes.com
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