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Sinomania! the truth about china
China SEARCH Engine
Volume I, Episode 39
November 14, 2007
Time to Short China's Yo-Yo Market? - Mining In or Out? IPOs - more

November 2, 2007

Oil Shock! Price Problems At the Chinese Pump - Stocks: Where's the Correction?
October 24, 2007

SPECIAL REPORT: 17th Party Congress - Shanghai Bubbles? - Market Numbers

October 15, 2007

China Bull Run Gets New Highs - PetroChina - IPOs - Money - more

October 9, 2007

Chinese Stocks Up & Up - IPOs - Iron & Steel - Pacific Pipeline - more

October 4, 2007

Hong Kong Booms - Commodities, Inflation, Oil at $100 a barrel? - more

September 25, 2007

UAW Tells GM No Jobs For China - Markets Hit 5,500 - China's Auto Industry - IPOs

September 19, 2007

New IPOs Rock Shanghai! But is Resistance Building? A Big Push for Private Equity…

September 10, 2007

Report on APEC 2007 - Energy Security - Markets Update - IPOs in Hong Kong

August 30, 2007

Chinese Stocks Stay Up - Big Bond Sale - IPOs - Upcoming Party Congress

August 22, 2007

China Stock Markets Get Higher But For How Much Longer? - Surprise Rate Hike - IPO Update

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: Chinese stocks slip, bounce back, and slide again, impact of anticipated futures index trading, a new ETF aims to short China, Beijing has new rules on foreign investment but can they prevent an ore cartel, IPOs and more...
Sinomania! Volume I Webisode 39, November 14, 2007

Market Yo-Yo: Can You Make Money On the Downside?
Beijing Directs Investment And IPOs!


Speculation abounds as to how Chinese markets will spend the remaining weeks of this calendar year. The gloom and doom chorus continues to warn of collapse and remains critical of Chinese stocks believed overvalued. But the boosters say a year's end rally is already underway.

What direction will the market go? One indicator of declines to come is the anticipated debut of index futures trading in China thus giving investors for the first time a way to profit when Shanghai slips. When futures gets the green light is unknown but Chinese regulators do like to introduce surprises particularly when things look hot.

In anticipation of index futures ProShares a purveyor of Exchange Traded Funds or ETFs, launched last week the UltraShort FTSE/Xinhua China 25 ETF - now trading on the American Stock Exchange under symbol FXP. ProShares was founded ten years ago by two Washington D.C. area securities professionals, Michael Sapir and Louis Mayberg, and recently won approval from the US Securities and Exchange Commission for its unique bearish ETFs.

Here's how the new China ETF works: the fund looks for daily investment results that correspond to twice the inverse of the daily performance of the FTSE/Xinhua China 25 Index that is composed of the 25 largest and most liquid stocks on the Hong Kong Exchange and was created by the joint venture between FTSE (the Financial Times of London and the London Stock Exchange) and Xinhua Finance Limited. For example if the FTSE/Xinhua China 25 falls one percent the ETF should rise in value by two percent.

Right now the ETF is invested mostly in financials which are bound to be volatile but also has exposure to energy and telecomms. Major stocks in the fund include PetroChina, China Mobile, and China Life - all currently traded on the New York Stock Exchange as well.

This is an interesting new vehicle for investors in Chinese stocks where risk is limited to the initial investment and there are no margin calls. Additionally, ETFs have interesting tax advantages.


As for the markets in China, it's a roller coaster ride or yo-yo depending on your frame of mind. The Shanghai Composite Index closed today at 5,462 up almost five percent having plunged to a two month low only two days ago. At least for now 5,500 does appear to be a new baseline. The CSI 300 Index was at 5,145.89 on November 14 and below 5,000 just yesterday, its lowest level in three months. Shanghai B shares closed at 344.76 today barely up from its drop November 13 to 330 its worst performance since early September. ShenZhen Bs rose slightly to 721.42 from the slide that ended Tuesday. During the slide the index hit its lowest level in almost three months.


News from Beijing is the National Development and Reform Commission and the Commerce Ministry may restrict or even ban foreign investment in areas the national government feels are overheated and critical to China's national interest specifically energy and mining. The new guidelines will encourage foreign direct investment in other key sectors. That should give investors clues as to where opportunities may appear over the next few years. The favored areas are environmental protection including investments in fixing China's profound pollution problem and renewable energy technologies, and investment in high tech particularly advanced materials and equipment.

One of the aims of the new foreign investment rules is to promote industrial restructuring of China's fragmented older industries. But that restructuring might better be helped by more foreign investment and strategic partnerships in the very industries to be restricted.

The big news this week is the mega merger in Australia between mining giants BHP Billiton and Rio Tinto. The impact of the deal would be the creation of a de facto cartel in iron ore as the combined Australian mining group and Brazil's CVRD would control about 80 percent of the overseas trade and be in a position to hold Chinese iron and steel makers hostage over prices.

Rumours are flying that Chinese steel giants are trying to buy stakes in Rio Tinto but companies on both sides deny it. China has voiced before to Australia the importance of forming what it calls 'strategic partnerships' over a buyer/seller relationship. Ironically, merging BHP Billiton and Rio Tinto may free up assets in energy and one rumour was that BHP advisors already went to China to market its petroleum and gas properties.

Speaking of strategic partnerships, China's new sovereign wealth fund announced its biggest foreign investment yet a $4 billion US dollar agreement with Bandes, the state development fund of Venezuela, for exploration in the oil-rich Faja del Orinoco region.


As expected, PetroChina raised billions in Shanghai and its foreign listed shares bounced back quickly from their much talked about brief dip. Bear Stearns got Warren Buffet's newsletter late but is now telling clients it's time to take profits.

Alibaba finally debuted last week on Hong Kong, quickly tripled in value, then dropped on profit taking. The company raised about $1.7 billion US dollars almost as much as Google did when it IPO'd in 2004.

Shandong based SinoTruck which has a joint venture with Volvo, is expected to IPO on Hong Kong later this month priced at $10 to just under $13 Hong Kong dollars. The company hopes to raise over a billion US dollars to increase production of its large tonnage cargo trucks.

And here's one for Europa - Asian Bamboo, a Chinese bamboo products company, will IPO on Frankfurt November 16 and has moved its headquarters to Hamburg in anticipation. The company's young founder Lin Zuojun hopes to raise up to $180 million US dollars to lease new plantations in southeast China and fund a bamboo flooring factory.

I'll see you next time!

© Sinomania! 2007 All Rights Reserved.

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