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Volume I, Episode 25
July 25, 2007
Will Barclay's Turn Chinese? 2Q/H1 Macro Report + IPOs!

July 19, 2007

Food Fight! China-USA sling hash / Peak Oil? / Markets Flat Line...

July 10, 2007

Chinese markets confused? Big IPOs - Chery+Chrysler

June 27, 2007

COSCO - China Mobile - IPOs - Telecom Mergers & Acquisitions

June 21, 2007

New Record Highs in Hong Kong, Shanghai: Will Beijing Put On the Squeeze? - IPOs & more

June 15, 2007

Fundamental Misalignment: US-China currency war - stock markets up & IPOs

June 7, 2007

China Stock Pop - Hot News items - climate change, tainted food...

May 31, 2007

Chinese stock markets hiccup - IPOs - USA-China Trade Gap

May 25, 2007

Report on the 2nd USA/China Strategic Economic Dialogue: Win-Win or When-When? - Market numbers - New IPOs

May 18, 2007

New life for Hong Kong? IPO Update - USA/China summit

May 11, 2007

Will Shanghai end up like NASDAQ or Nikkei? - IPOs

April 30, 2007

Tulips to Dotcom - is Sino Mania the next big bubble?

April 20, 2007

The Heat is on! - IPO Report - Air Pollution in China

April 15, 2007

China markets, IPO update, Beijing Ready for Olympics?

March 30, 2007

China markets up, up, up! Sinomania! goes to China

March 23, 2007

Focus on National People's Congress... Hi-Tech, IPOs

March 17, 2007

China's new investment strategy, IPOs, the Wrap...

March 7, 2007

China syndrome or hong bao bounce? New IPOs... more!

February 27, 2007

China Stock Market Yo-Yo, new IPO issues, the wrap

February 17, 2007

Chinese New Year edition! Will China buy Chrysler & more!

February 9, 2007

The USA-China WTO trade dispute and New IPOs

February 1, 2007

IPOs: New Red Chip — Bubble Burst? — USA-China

January 26, 2007

BUBBLE TROUBLE? — IPOs on NASDAQ — Renminbi Yuan

January 20, 2007

IPOs in 3 hot sectors — BAOSteel — Macro Report

HKEX Hang Seng Shanghai
SSE Shanghai Hong Kong
SZEX Shenzhen Beijing
MUSIC in China: Listen!

TRANSCRIPT: Will Barclay's Turn Chinese? Macro Report, More:
Sinomania! Volume I Webisode 25, July 25, 2007

Will Barclay's Turn Chinese?
A Red Hot Macro Report;
Plus Market Numbers and more IPOs!


Chinese stock markets are back up, the Shanghai Composite surging last Friday and this Monday to pass the 4,000 mark for the first time since June and closed today at 4,323.966. The news is the same for other major indexes including the CSI 300 which is above 4,000 points for the first time in a month and for the Shanghai B shares that closed July 25 at 309.32 and have now recovered the ground lost since June 19. I'll have more numbers in the macro report coming up.

And there's a new way to play the Shanghai A share market - remember A shares are not available directly to individual foreign investors: the IPOX 30 China A Share Index, a new product of IPOX-Schuster out of Chicago. The IPOX 30 components are the largest and most actively traded A shares. A share IPOs enter the index at about one week old and stay for 1,000 days. Currently the sector composition is about one third financials. The top 10 holdings include Chinese front-runner Industrial and Commercial Bank Corp.


Wuxi PharmaTech, a contract research firm headquartered in Shanghai, has filed with the United States Securities and Exchange Commission for an IPO on the New York Stock Exchange under symbol WX. Wuxi PharmaTech plans to issue over 13 million American Depository Shares priced between $11 and $13 US dollars. At that price the company could raise up to $120 million dollars. The funds will be used to build a drug safety center for increased lab test services. The company's two biggest customers, Pfizer and Merck, already account for almost 30% of the firm's revenue.

Another one for New York, E-House, a real estate services company with a sales force in 20 Chinese cities, has filed with the SEC to sell American Depositary Shares in the $11.50 to $13.50 US dollar range. The offering is approved under symbol EJ and could raise over $120 million dollars. Property markets in China are booming - I'll have more on that in the macro report.

China Southern Locomotive and Rolling Stock Industry Group plans a dual Hong Kong and mainland IPO for early next year according to reports. The listing could raise up to $2 and half billion US dollars. The company was established by the State Council in 2002 and is one of the top 100 companies in China. Its Sifang Locomotive subsidiary in Qingdao produces high-speed rolling stock. China Southern Locomotive has a ready customer in China's state-owned railways.

And one of the biggest Chinese companies available to investors, Aluminum Corporation of China or CHALCO will issue a huge number A share block as part of its takeover deal for Baotou Aluminum Company. Consolidation in high energy consuming industries is an important trend as China tries to achieve energy conservation. Takeover targets most likely will be smaller and privately owned companies.


Barclay's, Britain's third biggest bank, will receive a huge multi-billion pound cash infusion from the China Development Bank initially giving the state-controlled Chinese company a 3% stake in Barclay's. Barclay's will use the money in a hotly contested bid to acquire ABN-AMRO and thereby create one of the world's biggest financials. If that merger is successful, China Development Bank will increase its stake in Barclay's to 6.7% still a minority position that will not come with a voting board member.

Although an investment by China on this scale is large it is not that unusual in an open economy such as the United Kingdom and is mostly non-threatening. Nonetheless the prospect that venerable Barclay's, once the largest banking company in the world, could turn Chinese has many in The City chewing on their bowlers. Coincidentally, the American Blackstone Group where China owns a 9.9% stake will act as advisor to China Development Bank on the Barclay's deal.

Meanwhile on the continent the EU is putting China on notice. As in the USA, quality assurance has become the new control to slow the flood of Chinese imports. On Monday, the EU consumer protection commissioner Maglena Kuneva met her Chinese counterpart Li Changjiang (Director of the State Administration of Quality Supervision - China 's product safety watchdog) and gave China until November when Prime Minister Wen Jiabao meets with European Commission President Jose Manuel Barossa to deliver an acceptable report on actions taken for safety in Chinese exports.

European steel producers, however, want real action. The European Confederation of Iron and Steel Industries (Eurofer) says China's steel industry is out of control with EU imports from China expected to double this year. EU steel makers are asking the EU to file three anti-dumping measures against China with the World Trade Organization as soon as September.


Second quarter and half year 2007 data were released by China's National Bureau of Statistics last week and the numbers say the Chinese economy is hot to trot. Some highlights:

Gross National product is growing at 11.9%;

Headline Consumer Price Inflation is at 4.4% with a June spike in food prices up 11.2%;

Overall the economy is still all about investment and exports: fixed-asset investment in China was up 23% end June and exports increased 27% with a surge of exports to the EU where Chinese goods now make up a quarter of all EU imports;

Consumption is gaining strength - retail sales were up 12.9 % in the second quarter;

Chinese coal production was up 12% first half with import of coal up 47.6 percent;

Foreign exchange reserves grew to $1.33 trillion US dollars by end June;

China's money supply is up 17% end June with bank loan growth up 16.5% at the end of the quarter;

Rinminbi (RMB) appreciation accelerated and is currently running at a 6% annualized pace, believed to be the maximum increase tolerated by the Finance Ministry and Chinese central bankers;

Property prices were up in 7.1 % in 70 major cities;

And the Shanghai Composite index has gained 20% since the end of the first quarter even though it is down 14% from its May peak.

So is the Chinese economy a runaway train? If it is overheating will China move to increase interest rates and put in place policy measures, as it has so many times in the past, to put the brakes on the boom? Will there be a hard landing like the one in the late 1980s or mid 1990s or 2004?

Most analysts are saying "No." Many believe that the economy is in an upturn through 2008 due to an economic cycle that now follows the transfer of power in China's national government. Also many believe President Hu Jintao, who in all likelihood will be reelected for a second and final five year term, will do whatever possible to ensure the Beijing Olympics go smoothly and the country is not rocked by any disruptive economic crisis.

I'll see you next time!

© Sinomania! 2007 All Rights Reserved.

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