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MAKE MONEY BLOG$~Investors in China’s main financial district are talking about the following before the start of trade today:
China stocks may be heading for more lows amid continuing international worries about the impact of Europe’s debt crisis on global growth. Given the wave of recent government efforts to support the stock market, the Securities Times in a surprisingly stark front-page article today said state-owned companies need to prepare for three- to- five years of “winter.” Citing Shao Ning, a top regulator at the State-owned Assets Supervision and Administration Commission, the paper said China’s economy has entered an era of contraction, and cost management will be an increasing factor in success.
Key China stocks traded in the U.S. were mostly lower on growth concerns yesterday. Among the decliners, shares in China’s Internet giants Baidu lost 3.1% and Sohu fell 2.2% Forbes China, the licensed Chinese-language edition of Forbes, just yesterday made Baidu CEO Robin Li its CEO of the year. (See article here.)
If cost control is going to be more important, then slower global growth should benefit heavy consumers of oil, whose price has been falling owing to relatively weak demand. Although U.S.-traded shares in Chinese oil producer Petrochina lost 2.7% last night, shares in state-controlled China Eastern Airlines bucked the U.S. downturn, rising 2%.
Overall tepid demand, however, appears to be hurting more industries than it is helping. The China Securities News reported today that the production, measured in value, was down 0.7% in the first five months of the year, while weight fell 10%. And China Business News reported that new orders, measured in weight, plunged 47% during the period. That, along with the slow global macro growth picture, may not augur well for big makers such as China Shipbuiding and China Rongsheng. (See related story here.) Sales for key types of construction equipment also dropped by more than 20% in the first five months of the year, the Shanghai Securities News reported. If the trend continued, that would hard on suppliers such as Sany Heavy, led by Chinese billionaire Liang Wengen, and Caterpillar of Illionois.
With an eye toward cost savings for its consumers, Chinese auto and motorcycle exporter Lifan plans to invest more than $100 million in the next three years to start production of energy-efficient batteries. The company’s Shanghai-listed stocks have lost 30% in the past year. Chairman Yin Mingsheng and his family ranked No. 135 on the 2011 Forbes China Rich List with wealth of $1 billion. (Click here for more information about the 2011 Forbes China Rich List.)
Auto shares as a group may face trouble today after a top planning official said yesterday that the government isn’t planning any new incentives to boost sales, according to a Bloomberg report. U.S. companies such as GM and Ford have been stepping up their investments in China on hopes that relatively strong macroeconomic growth will help sales. However, industry deliveries have been weak this year and manufacturers are struggling with relatively high inventories.
Sellers of more than autos have had a rough stretch in the first half. Hong Kong-traded shares in C.P. Lotus, the operator of a hypermarket chain in China led by the billionaire family of Thai businessman Dhanin Chearavanont, slid by 0.4% yesterday after the company said last Friday it expects to report a loss for the first six months of 2012. (See story here.) Shares in Chinese appliance retailer Huiyin, for instance, have fallen since it issued a first-half profit warning on June 15. Huiyin dropped another 4.5% yesterday.
– with Maggie Chen
source: forbes.com
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