Category: Finance & Economics

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CNBM shares fall over fears for aquisition strategy

By Clement Tan

HONG KONG, March 25 (Reuters) – China National Building Material Co Ltd’s shares fell on Monday after the company’s 2012 net core profit revealed the extent of its reliance on subsidies, raising fears that its aggressive acquisition strategy could prove unsustainable.

Declining demand has spurred consolidation in the Chinese cement sector, led by larger sector players such as CNBM. Three of its subsidiaries acquired 24 cement companies in 2012, according to the company’s 2012 earnings statement.

CNBM shares in Hong Kong were down 6.2 percent at 0400 GMT, nearing its December lows, even after the company reported a 30 percent decline in 2012 net profit on Friday which was better than some analysts had expected.

In contrast, Anhui Conch Cement Co Ltd rose 0.8 percent after posting a 45 percent decline in 2012 net profit, spurred by core net profit, which excluded subsidies, that was 14 times more than CNBM’s 2 yuan per ton, according to Nomura.

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Moribund China B-shares find escape hatch in Hong Kong relisting

By Pete Sweeney and Clement Tan

SHANGHAI/HONG KONG, Jan 7 (Reuters) – China’s biggest ship container maker has revived its moribund B-shares – mainland shares priced in foreign currencies – by relisting them in Hong Kong, sparking new life in other B-shares that may be able to emulate its exit from an obsolete market that regulators want to wind down.

China International Marine Containers (CIMC) delisted its B-shares in late November, abandoning a once-vibrant market for foreign investors that policy changes rendered a little-traded backwater, and on Dec. 19 resurrected them as H-shares , or Hong Kong-traded shares of mainland companies.

Despite a lacklustre start, CIMC’s H-shares have gained 20 percent in their brief two-and-a-half week life, triggering a hunt for other Cinderella B-shares that might follow.

“Investors weren’t too sure what to expect with the first B-to-H relisting, but after what happened with CIMC, I think people are starting to get interested,” said Hong Hao, chief strategist at Bank of Communications International Securities. “The B-to-H concept will likely remain a very strong thematic play this year.”

The firms considered most likely to follow CIMC to Hong Kong are big companies such as China Vanke Co Ltd , China’s largest listed property company, which a Hong Kong newspaper said could make an announcement as soon as this week. Continue reading “Moribund China B-shares find escape hatch in Hong Kong relisting”

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China white spirits rally sours on safety scare

By Clement Tan

HONG KONG, Nov 21 (Reuters) – Shares in Chinese liquor makers have fallen sharply, reversing some this year’s stellar gains, on a contamination scare following reports that a maker of white spirit added more plasticisers to its products than industrial standards allow.

This week’s sell-off of shares, which had outperformed the market until November, followed a report carried by several mainland media outlets, citing tests conducted by an international third-party that claimed Jiugui Liquor exceeded the levels of plasticisers allowed.

Plasticisers are additives that increase the fluidity of a material, but are also toxic chemicals that can cause damage to men’s reproductive health and cause early female puberty when consumed over a long period.

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JP Morgan Asset Management bullish on China property

By Clement Tan

HONG KONG, Oct 16 (Reuters) – China property stocks offer good investment opportunities as Beijing engineers a soft landing for a sector that is seen crucial for the broader economy, according to a fund manager at JP Morgan Asset Management.

“Beijing cannot afford to let its property sector drop too much,” Emerson Yip, who co-manages the JF Greater China fund, which had assets of $647 million as of end-August, told a media briefing late on Monday.

With prospects of a recovery in its manufacturing sector uncertain due to a weak global demand for its exports, Beijing will need to rely on the real estate sector to maintain growth, Yip said. He declined to mention specific stocks.

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China’s downturn-proof booze makers hit government wall

By Clement Tan and John Ruwitch

HONG KONG/SHANGHAI (Reuters), Aug 10 —  The makers of China’s fiery liquor baijiu, a pricey, potent drink that is a staple at state dinners, say it inspires poets and can even ward off dementia.

For investors in the largest baijiu makers Kweichow Moutai Co Ltd and Wuliangye Yibin Co Ltd, the appeal is more mundane: the companies paid out huge dividends and raised earnings forecasts when a slowing economy had prompted dozens of Chinese firms to issue profit warnings.

Demand for high-grade liquor at state banquets and premium pricing helped Moutai post an operating profit margin last year that was more than double that of tech giant Apple Inc, the world’s most valuable company, Thomson Reuters data shows.

Moutai is even a partner of the Chinese Olympic Committee, pushing out a commemorative brew for the London 2012 games.

But the stellar first-half results that these companies are expected to report this month may mark the high point if Beijing cracks down on lavish baijiu-drenched banquets.

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Policy reluctance may spell third losing year for China stocks

By Clement Tan and Lu Jianxin

HONG KONG/SHANGHAI, July 23 (Reuters) – Reluctance by the People’s Bank of China to expand money supply in the world’s second-largest economy too rapidly could condemn the country’s stock markets to a third straight year of losses in 2012.

A congested initial public offering (IPO) pipeline is likely to aggravate tight liquidity conditions as Beijing, wary of reigniting inflation, sticks to its “prudent” monetary policy.

In addition, around 500 billion yuan ($78.5 billion) worth of share lockups are set to expire later this year, which could further weigh on the market. The total market capitalisation of Chinese A shares is currently around 22 trillion yuan ($3.5 trillion).

Onshore Chinese markets have completely surrendered gains made earlier in the year, retreating in response to Europe’s debt crisis, economic slowdowns at home and abroad and a recent flurry of corporate profit warnings.

Major benchmark indices such as the Shanghai Composite Index and the CSI300 Index of the top Shanghai and Shenzhen listings have already posted two consecutive annual losses, giving up a third of their market value in the process.

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Investors eye China services as the next big thing

By Clement Tan

HONG KONG, March 21 (Reuters) – As Chinese leaders encourage the country’s 1.3 billion people to open their wallets to boost domestic demand, hotel chains, supermarkets and other service providers offer investors a fresh tilt at the country’s growth story.

Beijing is targeting a 4 percentage point rise in the service industry’s contribution to GDP by 2015, up from 43 percent in 2010. Still well below the U.S. service sector, which makes up about two-thirds of the world’s largest economy.

For investors with longer-term horizons, services that cater to a growing middle class offer an opportunity to cash in on a shift in consumption patterns as Chinese consumers move increasingly up the value chain, say analysts.

“There’s a lot of pent-up demand for services due to supply constraints,” said David Cui, Bank of America-Merrill Lynch’s Shanghai-based chief China equity strategist.

Policy-makers want increased domestic spending to offset a reliance on exports, and have outlined plans to narrow the rural-urban divide and boost wages for 158 million migrant workers. The services sector is vital for future job growth.

Supermarkets, logistics firms and tourism companies focused on domestic travellers offer good opportunities, says Cui, who recently authored a report on China’s services sector, though analysts warn that stock picking is still vital.

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Chinese investors shrug off U.S. accounting scandal fallout

By Ai Peng Soo and Clement Tan

SHANGHAI/SHENZHEN, June 13 (Reuters) – For the two dozen Chinese retail investors gathered at the dimly lit public hall of a brokerage firm in Shanghai, the accounting scandals involving U.S.-listed Chinese companies are far from the hot topic of the day’s trading as they swap strategies over tea and cigarettes.

Many of the investors, mostly retirees, have not even heard about the saga over fake numbers among some Chinese firms that has shaken U.S. investors and stunned regulators there.

Even those who have read about the news in scattered media reports were more interested in China’s monetary tightening or tips on the favoured sector of the day than in concerns the companies they have invested in might be hiding similar bombshells in their books.

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WaMu failed because of run on bank, former regulatory chief says

By Jim Puzzanghera and Clement Tan

John Reich, who was director of the Office of Thrift Supervision, tells a Senate panel that Washington Mutual’s 2008 collapse resulted from a drop in public confidence, not a failure by his agency.

Reporting from Washington — The former head of the chief banking regulatory agency that oversaw failed Washington Mutual told lawmakers Friday that the giant savings and loan collapsed because of a run on the bank, not failures by him or other regulators.

The testimony of John Reich, who served as head of the Office of Thrift Supervision from 2005 to 2009, came as a Senate subcommittee released the results of an 18-month investigation that blasted regulatory supervisors for doing little to halt risky practices at WaMu that bank examiners had identified as early as 2003.

The criticism was echoed by a report this week on WaMu’s collapse, the largest bank failure in U.S. history, by the inspectors general of the thrift agency and the Federal Deposit Insurance Corp.

Reich said WaMu was seized by regulators on Sept. 25, 2008, because of a $16.4-billion run on deposits after the sharp decline in the economy throughout the year and the failure of Lehman Bros. and the bailout of American International Group Inc. just days earlier.

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