A key barometer of manufacturing activity in China declined so sharply in August that even the typically-bullish economists at investment banks have struggled to find anything positive to say.
The preliminary HSBC China Manufacturing PMI index fell to a nine-month low of 47.8 in August, down from a final reading of 49.3 in July. A reading below 50 indicates a contraction.
“This flash report is plainly awful,” Yao Wei, China economist at Société Générale, wrote in a note to clients. Read more
China’s largest gold producer is already a force to be reckoned with. But if the visionary head of China National Gold Corporation gets his way, it’s going to be much, much bigger.
As the FT reported on Friday, the state-owned group is in talks to buy a majority stake in African Barrick Gold from its parent Barrick Gold, the world’s top gold miner.
For anyone seeking an insight into the thinking behind the deal, beyondbrics has translated a fascinating article by Sun Zhaoxue [pictured], president of China National. Read more
Webb and web
It’s a basic rule of investing: don’t buy shares in companies whose directors and advisers have poor track records.
The trouble, however, is that digging up this kind of historical data has traditionally been a laborious undertaking, particularly for retail investors without access to expensive terminals like Bloomberg or Reuters.
Not any more – at least in Hong Kong, thanks to a powerful, free, online database created by David Webb, the corporate governance activist. Read more
Now it’s pretty much official: Beijing is happy to see the renminbi depreciate.
The China Securities Journal, an influential state newspaper, commented on its front page on Monday that China needed a weaker currency to compensate for a deterioration in the global economy. Read more
China Development Bank, the state-owned lender known for funding infrastructure projects like the Three Gorges Dam, is providing more than $1bn to help small Chinese companies leave the US stock market, according to Bloomberg.
Beyondbrics can’t help but wonder whether CDB’s foray into the US has something to do with the political battle between Washington and Beijing over cross-border regulation of accounting firms. Read more
Don’t believe the hype about the “internationalisation” of the renminbi.
That’s the message from Yu Yongding, an academic economist and adviser to the Chinese government, who has just published a paper titled Revisiting the Internationalization of the Yuan.
Yu takes a machete to the great expectations of banks like Standard Chartered and HSBC, which predict that the renminbi will rapidly become an important currency in global trade and investment. Read more
Chinese policy makers spend a lot of their time worrying about inflation. But the growing risk now appears to be deflation.
Official data released on Monday show that the consumer price index rose 2.2 per cent in June from a year earlier, down from 3 per cent in May. But as our charts show, key indicators such as money growth and producer prices suggest that CPI has much further to fall. Read more
Coal may be an unloved commodity and IPO markets may be floundering, but a Chinese coal producer has just raised $900m in Hong Kong’s second-biggest new share sale this year.
Inner Mongolia Yitai Coal, the biggest coal group in the Chinese region bordering Mongolia, sold 162.8m shares at HK$43 (US$5.50) apiece on Friday, at the low end of a range marketed to investors, Reuters reported. Read more
China’s property market is showing signs of life. Home sales have jumped in recent weeks and developers are stepping up their purchases of land. Some analysts reckon that after a stagnant start to the year, the market may have bottomed – a development that could reignite the construction boom and have big implications for economic growth.
But skeptics counter that the rebound in sales volumes in May and June is only a result of aggressive price discounting by developers and could well prove to be short lived. Read more
Roll up, roll up, come get your China stocks!
Beijing announced on Wednesday that foreign institutions no longer need a minimum $5bn under management and a five-year track record before they can apply for a quota to invest in mainland Chinese capital markets. The threshold is now $500m in assets and two years’ operational experience.
To China bulls, this is another step towards a deeper and more open financial system. Read more
If it ain’t broke, don’t fix it. That’s the reaction in Hong Kong to the suggestion by Joseph Yam that the territory should consider breaking its currency’s 28-year-old peg to the US dollar.
Yam, who ran the Hong Kong Monetary Authority for 16 years until 2009, proposed in a paper on Tuesday that the Hong Kong dollar could be managed in a more flexible fashion against the dollar, renminbi, or a basket of currencies. Read more
With tensions rising in the South China sea, gung-ho investors may be looking to add a bit of firepower to their portfolio.
Nomura, the Japanese investment bank, says an “Asian arms race” is sweeping nations from China to Australia, a structural theme that could provide a lucrative opportunity for investors. Read more
Something funky is going on with the renminbi.
Swift, the global payments network – essentially an all-seeing eye over the global banking system – has released some intriguing new data about the international use of the Chinese currency. Read more
Investors appear to be losing their appetite for dim sum bonds, or renminbi-denominated bonds issued outside mainland China.
Over the past three months, dim sum bond yields have not stopped rising. An index of 120 such bonds compiled by Bank of China shows that average yields are now 5.6 per cent, up from 4.8 per cent in March and 3.5 per cent a year ago (see chart after the jump). Read more
Bondholders, beware. China’s property developers face rising risks of default, according to the latest stress tests conducted by Moody’s and Standard & Poor’s.
The two rating agencies published reports on Thursday that suggest the sector will continue to deteriorate over the coming months because of falling sales volumes and dwindling funding options. Read more
China is slowing, that much is clear. Which economies will suffer most as a result?
Lombard Street Research has identified a few export-dependent countries that “could soon regret having put all their eggs in the China basket”. Read more
The proposal by Hong Kong’s securities watchdog to create an explicit civil and criminal liability for investment bank sponsors of new listings should be welcomed.
Yet, even if the Securities and Futures Commission gets what it wants – and that is a big ‘if’, since the proposals require a change to Hong Kong’s legislation – sponsors have little to fear. Read more
Things keep getting worse for Sino-Forest, the Toronto-listed Chinese forestry company that filed for bankruptcy protection last week.
Ernst & Young resigned as Sino-Forest’s auditor on Thursday, and the Toronto stock exchange announced that the company’s shares will be delisted next month. Read more
First cars, now booze. Chinese liquor producers saw their shares tumble on Tuesday after Premier Wen Jaibao vowed to ban government officials from squandering public funds on cigarettes and luxury alcohol.
The move, designed to quell public anger at official excess, comes just a month after Beijing proposed banning the purchase of any car that is foreign, big or extravagant, for official vehicle fleets. Read more
During the second half of 2011, Chinese property developers were pariahs of global bond markets. As fears mounted about the prospect of a Chinese property crash, mainland developers discovered that they were no longer able to sell bonds to foreign investors.
In recent weeks, however, the market appears to have reopened – at least for some of the stronger developers. Read more