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Volume I, Episode 28
August 14, 2007
China Toy Recall - Markets & IPOs - Western Banks Catch Asian Flu?

August 6, 2007

Shanghai Composite Busts Past 4,600 - Beijing Bets on Banks - Chinese IPOs in Japan

July 31, 2007

China Stocks Up Again & Again! - Pussyfooting Around Currency? - Democracy in Japan?!

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: China Toy Recall - Markets & IPOs - Western Banks Catch Asian Flu?...
Sinomania! Volume I Webisode 28, August 14, 2007

Crisis in Toy Land! Washington's Latest Trade Spat with Beijing;
The Asian Flu in Banking Moves West;
And Chinese Markets Defy Gravity!


The announcement today by the U.S. Consumer Products Safety Commission that it compelled giant toy maker Mattel (Symbol: MAT) to recall millions of Chinese made toys including famous American brands such as the Barbie doll led to new heights of hysteria in American media with a flood of attention-grabbing headlines and TV reports on the new Chinese bogeyman literally hiding under the beds of America's children.

Washington politicians were quick to defend American youth. Democratic Senator Dick Durbin of Illinois, who is running for reelection and receives the bulk of his PAC money from Labor, has demanded that the Chinese toy invasion be stopped at the border! This despite the fact that no one has been injured or harmed by any of the toys recalled according to Consumer Products Safety Commission chairman Nancy Nord herself.

Ms. Nord said the recall was "intentionally large" to get as many of the affected toys off the shelves and fulfill the Nanny State's duty to protect future citizens from parents who've not taught their children that ingesting toys is a bad idea.

Today's action and earlier moves by the US Food and Drug Administration - the FDA - reveal that Washington is taking its trade spat with Beijing to a new and different level.

Imports of Chinese goods are expected to be up by $3 and a half billion dollars to $63.5 billion for the second quarter. That puts 2007 on pace for another record US trade deficit with China.

Stymied by its inability to control China trade relations Washington appears now to be using the policies and regulations of the FDA, the Consumer Products Safety Commission, and other government entities as weapons in trade disputes.

But who's really at blame?

Is China to blame? The toys were made in China, yes, but Mattel's factories and workers in China were built and are paid by US dollars - direct foreign investment from Mattel and other companies. By building factories and relocating jobs to China multinational corporations such as Mattel get increased profit margins and by contracting out production and other services they get to skirt regulations in the USA.

Who's responsible for quality control? Ten years ago in 1997 Mattel added what it calls "Global Manufacturing Principles" to its corporate responsibility policy. The company created a highly successful and imitated council to monitor its lofty global principles which include statements on safety and hazardous materials. Only two weeks ago Mattel's investor relations celebrated the 10th anniversary of this program.

In the wake of the toy recall it is apparent that Mattel's global manufacturing principles and program are an utter failure.

And what about inspection? One area rarely mentioned in the media frenzy on Chinese toys is the fact that only a small percentage of shipping containers entering the United States are inspected, ranging from one to maybe 6% at some West Coast ports. And that's X-ray scanning - hand inspections are practically non-existent.


Chinese stocks are on a steady climb since the last episode reaching a new record high almost every day. The Shanghai Composite Index closed August 14 at 4,872.785 already hundreds of points above last week. The CSI 300 closed up again today at 4,795. The Shenzhen Composite closed down slightly since the week began but is still in record territory at 1,331.216.

Shanghai B shares are still an exception with some small gains over the past week and closed August 14 at 323.168. The Shanghai B index is still one of the best performing classes of stocks in the world right now up over 130% in both Yuan and US dollar terms since the start of the year.


Buoyed by the Chinese bull market, a string of big Chinese brokerages is planning IPOs mostly on Shanghai's domestic market: GoldState Securities of Shanghai is planning a $4 to $5 billion dollar (US dollar) IPO on China's domestic exchanges early next year; Merchants, Everbright, and Orient securities are names rumoured to be planning IPOs.

The stocks of financials such as brokerages are doing very well. The price of CITIC Securities, a company discussed in an earlier episode, is up over 500% so far this year.

Qingdao Port Group, which operates China's largest crude oil import terminal, plans an IPO for later this year to raise funds to expand its port capacity. The company also handles iron ore imports which are surging to feed the demand of China's ever growing steel industry. The IPO may raise over half a billion US dollars on domestic exchanges.

Shenzhen Airlines is discussing an IPO that may raise up to $1 billion dollars probably on the Shenzhen Stock Exchange sometime next year. No other details at this time.


Speculation continues to swirl about the massive cash infusions from world central banks. Was a collapse of the so-called developed world's banking system averted by the European Central Bank or ECB and the United States Federal Reserve last week? Both institutions poured billions of dollars into their banking systems. Even today, the ECB injected another 7.7 billion Euros, around $10 billion US dollars. Canada has also added cash.

The reason, most observers say, is to restore confidence in the aftermath of big losses in America's mortgage and bond markets. Over half - a record amount - of the US corporate bond market is now considered "speculative" the new euphemism for junk bonds.

But the reaction outside the Atlantic Alliance has been more muted. The Bank of Japan added around $5 billion dollars but it is a move it makes on a regular basis having done so about 20 times previously. Australia similarly added only a small amount of cash and the rest of Asia has an abundance of liquidity.

China as we reported in last week's episode is capitalizing some of its last remaining state-controlled banks but that is a process removed from the credit problems of overseas markets.

Indeed it appears that ten years after the "Asian Flu" financial meltdown that Asian banks may have healthier assets than banks in the West.

I'll see you next time!

© Sinomania! 2007 All Rights Reserved.

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