TRANSCRIPT: Chinese stock markets continue to
reach new records, big new China infrastructure
IPOs, hints at iron and steel consolidation, and
the Russia-China Siberian Pacific Oil Pipeline
moves forward...
Sinomania! Volume I Webisode 35, October 9, 2007
Big Markets Get Bigger!
Big Changes for Iron & Steel!
More Big IPOs!
And Big Oil Gets A Pipeline!
NEW RECORD HIGHS
The rally continues on Chinese markets as records
are smashed with no end in sight. The Shanghai
Composite Index was up two and a half percent
on Monday to a new record high closing at 5,692.755
and is just a hair under 5,700 as we speak. The
CSI 300 index reached yet another record as well
closing October 8 at 5,653. Shanghai B shares
inched their way to a new record high of 368.485
on Monday although ShenZhen Bs suffered a slight
dip. In Hong Kong the Hang Seng Index is down
a fraction but remains well above 27,000.
In macro news, China's National Bureau of Statistics
revealed that retail sales were up almost 17 percent
year-on-year during the week long National Day
holiday with close to $47 billion US dollars worth
of consumer spending. It was a big week for tourism
as millions traveled around China. 363 million
people traveled by road up almost ten percent
from 2006 and far exceeding air and railway traffic
both also up double digits. This is an interesting
trend and gives a signal to future growth as China
rushes to complete its version of the US interstate
highway system. Think gas stations, convenience
stores, and motels for future investing opportunities.
IPO REPORT
The big talk so far this week is the IPO of China
Digital TV that debuted at $16 dollars on the
New York Stock Exchange last Friday under symbol
STV. The stock gained 75 percent on its first
day and closed October 8 at $39.49, a gain of
almost 11 and a half percent from Friday! Of course
some success is expected when your stock is featured
on the front page of the Investor's Business Daily
and the online Motley Fool.
Alibaba, the big Chinese e-commerce portal partly
owned by Yahoo! got approval from the Hong Kong
exchange for its IPO, expectations are it will
raise up to $1 billion US dollars and be the biggest
Chinese Internet play of the year.
Despite Chinese regulators uncertainty about
Hong Kong listings over domestic listings or vice
versa, three big infrastructure plays are in the
works for the Hong Kong exchanges:
Beijing based China Railway Engineering Group,
China's largest construction company, ranked by
Fortune magazine as one of the top 10 engineering
and construction firms in the world with 2006
revenues close to $19 billion US dollars, is planning
an IPO on Hong Kong that could raise $2 billion
US dollars. The move is going ahead despite reports
last week that Chinese regulators prefer domestic
listings prior to Hong Kong listings for state-owned
conglomerates.
The resources shipping unit of Sinotrans Group
is planning an IPO on Hong Kong valued at up to
$1.3 billion US dollars. The shipping core currently
operates bulk carriers and oil tankers and has
assets including terminals and storage facilities.
Another arm of the group, Sinotrans Limited is
already listed as an H share stock in Hong Kong.
A rival in the bulk shipping business, North
China Shipping Holdings, a branch of HOSCO or
Hebei Ocean Shipping group out of Hebei Province,
is already based in Hong Kong and also plans to
get in on the IPO action with a listing that may
raise $700 million US dollars.
Both companies hope to expand and capitalize
on record high freight rates.
IRON & STEEL CONSOLIDATION
Clues to the long-anticipated consolidation of
China's iron and steel industries were revealed
by Zhang Xiaogang, the head of Anshan Iron & Steel,
China's oldest steel conglomerate with iron works
dating to 1915. Zhang is also chief of the China
Iron and Steel Association so his words are to
be heeded. Zhang indicated at the International
Iron and Steel Institute conference in Berlin
that the central government will close ("phase-out")
outdated pig iron and steel capacity within the
next three years.
China is far and away the world's iron and steel
leader but the industry is scattered all over
the country with many small and inefficient operators
with insufficient transport access. For examples,
there are literally dozens of steel mills in relatively
remote inland areas with 2,000 tons or less capacity.
Old pig iron and ferroalloy mills also abound.
Zhang spoke of conglomerates with 50 million
tons per year capacity so the question is be which
of the big iron and steel centers will emerge
as the new giants -- Anshan in Liaoning Province?
Shanghai and Wuhan? Or Sichuan and Tianjin? If
Zhang is right, look for a wave of mergers and
acquisitions soon.
PACIFIC PIPELINE
Finally, big news on the big oil and gas front:
the controversial Pacific Pipeline linking the
vast underdeveloped east Siberian oil fields with
the Pacific Ocean on the border of China and Russia
may soon move forward. An agreement for construction
of the pipeline is to be signed in November when
Prime Minister Wen Jiabao goes to Moscow according
to Russian sources.
Russian Deputy Prime Minister Alexander Zhukov
has said the two sides have agreed on construction
of a pipeline spur into China from the border
city Skovorodino not far from the Heilongjiang
river.
Meanwhile China National Petroleum Corporation
and Russia's state-owned Rosneft oil concern are
still negotiating prices but it is believed China
will get development deals as part of the complex
arrangements. China National Petroleum is the
parent company of PetroChina whose stock trades
on the Hong Kong, New York, and Shanghai exchanges,
and could benefit hugely by future deals making
it even more valuable than it is today.
