Lujiazui Breakfast: News And Views About China Stocks (Oct. 19)

Investors in China’s main financial district are talking about the following before the start of trade today: 

Demand for shares in China today may be buoyed by overnight news of profit growth at U.S. banks.  Major U.S. stock indices all rose last night.

U.S. stocks gained even though a Chinese GDP report yesterday stoked worries about slower growth and continued tight monetary policy. China said yesterday GDP rose by 9.1% in the third quarter, down from 9.5% in the second quarter. The accuracy of Chinese economic data is viewed skeptically by many.  Although China’s GDP growth is robust by global standards, the report suggests easing growth and a continuation of high interest rates to fight inflation. The government also said yesterday retail sales rose by 17.7% in September from a year earlier, compared with a 17% rise in August,  said industrial production increased by 13.8% in September compared with 13.5% in August. Hong Kong’s main stock index plunged 4.2% on the reports, and Shanghai’s main index lost 2.3%. Chinese banks were hammered. Among them, ICBC fell 6% in Hong Kong.

Similarly not celebrating the double-digit increase in industry production and reported big increase GDP were cyclically sensitive steel stocks.  Hong Kong-traded shares in Angang Steel dropped by 5% in Shenzhen yesterday on indications of soft demand. In U.S. trading last night, General Steel lost 1.7%.

Also declining in Hong Kong yesterday: rail-related companies already battered by a poor safety record. China Rail Construction, which builds high-speed rail systems, lost 9% on concern that the government would slow new projects.
One bright spot in domestic trading on Tuesday: Sinohydro, a government-controlled dam construction company, rose by 17% on its first day of trading at the Shanghai Stock Exchange after completing one of China’s largest IPOs this year. The company raised 13.5 billion yuan, or $2.1 billion, in an IPO last month. Sinohydro’s sales last year climbed 24% to 101.5 billion yuan, or $16 billion.  Another A-share IPO, Jilin Yongda Group, rose by 30.6% on its debut yesterday. The company raised 760 million yuan, or $119 million, in an IPO this month.

In U.S. trading, meanwhile, shares in Nasdaq-listed Chinese video site Tudou rose by 1.2% overnight after the company said it would form a joint venture with in China to license video content with Shenzhen-listed LeTV, one of the country’s largest online content owners.  

After rising 14% a day earlier, Nasdaq-traded shares in Shanda Entertainment gained another 1.8% yesterday after the company said chairman Chen Tianqiao has offered to buy shares in the company not already owned by his family. Chen would pay $41.35 per American depositary share.  (See related story here.) Financial analysts here have speculated  that Chen might list the company or part of it back in Shanghai. Chen, a pioneer in China’s online game business, ranked no. 190 the 2011 Forbes China Rich List with wealth of $850 million. That figure includes shares held by his wife.

In other overnight U.S. trading, shares in state-controlled airline China Eastern fell 0.7% overnight after it trimmed the overall scale of an order for jets. That suggested to investors that it was anticipating slower future growth.

Finally, back in Hong Kong, Zall Development, whose main owner Yan Zhi ranked no. 96 on the Forbes China Rich List with wealth of $1.18 billion, issued a warning to investors this morning about a high concentration of ownership in the real estate development company. Some 98% of the company is owned by 14 people, leaving only 0.22% of the company in the hands of other shareholders. The stock closed at HK$3.39 yesterday compared with its July listing price of around HK$2.89.

source: forbes.com

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Posted in: Hong Kong,IPO,Shanghai Stock Exchange