RECORD HIGHS AND HEALTHY CORRECTIONS? CHINESE STOCKS ON A ROLLER COASTER
By Ben Calmes
© Sinomania! 2007

First aired: February 27, 2007, 21:55 (PST)

[THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.]

(BEGIN VIDEOTAPE)
ANNOUNCER: Hello! And Welcome to Sinomania! For the the week of February 25, 2007.

Yo-Yo Ma! Record highs and healthy corrections? Do the Chinese markets have it all or is 2007 shaping up to be a wild roller coaster ride? Some interesting IPO developments —another big listing for NASDAQ and the first foreign owned full service brokerage comes online. And we introduce a new feature chock full of juicy numbers: the wrap!

Stock exchanges on the Chinese mainland were closed all last week for the long holiday officially known as “Spring Festival” but the Hong Kong exchanges reopened on February 21 and markets were open in the USA.

Some interesting price movements among Chinese companies listed in America as this week opens: APT Satellite, Trina Solar, and ASAT Holdings, rose over 10% -- the first two are listed on the New York Stock Exchange and ASAT Holdings is listed on the NASDAQ capital market. All three are technology sector firms with substantial market capitalization.

A minor blowout on the Over The Counter Bulletin Board caught our eye with Forlink Software sinking over 15% to about ten cents a share although on small volume. Forlink is a software firm hoping to cash in on the Beijing Olympics by developing solutions for a China Mobile unit. Look for these stocks symbols at the end of the show.

IPO REPORT

The biggest news this week is the announced spin off of Xinhua Finance’s Media group, the aptly named Xinhua Finance Media. The IPO will debut on NASDAQ with proposed ticket XFML.

XFML will offer over 23 million ADR shares in the $12 to $14 dollar price range which is a p/e ration in the mid to high 30s based on current earnings. At that valuation the IPO could raise over $300 million, the largest American Chinese listing since Suntech Power at the end of 2005.

There is risk – Xinhua Finance Media is only a year old but its parent company, Tokyo-listed Xinhua Finance is well respected for high quality programming and international standards. Xinhua Finance Media’s properties include a nationwide TV network, radio stations in Shanghai and Beijing, and magazines, all aimed at China’s high-income urban market. The company is essentially an advertising play with revenue growing at double digits.

After the offering, the parent company will own just over 1/3 of shares compared to almost half currently but will still control the bulk of the XFML’s voting stock.

UBS Securities, a joint venture between Swiss powerhouse UBS and Beijing Securities, has received authorization from the China Securities Regulatory Commission to underwrite domestic IPOs and provide investment banking advisory and other services thus making UBS Securities the first foreign-owned full service brokerage in China. In addition, last week the company became a member of the Shenzhen Stock Exchange.

Tongjitang Chinese Medicines a traditional Chinese medicine company out of Guizhou province plans an New York Stock Exchange listing under proposed symbol TCM according to its filing at the US Securities & Exchange Commission.

Tongjitang will offer over 9 million American Depositary Shares worth about 4 ordinary shares valued between $15 and $17 US dollars. The company has enlisted an American drug testing firm to perform FDA level tests on a Chinese medicine for oestoperosis. So, could be one to watch.

THE WRAP

On Monday Shanghai and Shenzhen posted new record highs but as we speak, another correction with indexes down nearly 5% overall and most of the gains from late January being wiped out. Leading the declines are financials, particularly Citic Securities and, once again, China Merchants, China Minsheng, China Vanke, and Baosteel.

The Shanghai Composite is at just above 2,870, down over 170 points. The Hang Seng China Enterprise is at 9,665 down 224.

DaimlerChrysler’s plans remain secret but talks are continuing between Chrysler and Chery, expanding their relationship to include major auto parts such as transmissions and adding models to their export plan. Neither company is commenting.

Steel giant BaoSteel is planning a roadshow probably in April to showcase its plans for a New York Stock Exchange listing.

And finally, last night at the Academy Awards here in southern California, a Chinese documentary about AIDS orphans in Anhui, won an Oscar for best documentary. This week’s edition of the esteemed British scientific journal The Lancet features a report on China’s response to AIDS that may surprise you: The Lancet says China’s turnaround on AIDS should be praised and reveal some stunning successes in dealing with a potentially formidable problem.

Remember – investment decisions are up to the viewer! Please see the important disclaimers at the Sinomania! website.

I’ll see you next week!