Tuesday, September 25, 2007

Number Of The Day....China IPO´s

China.com.....? Click here for more posts on the most fascinating market and the often "stretched" valuations.......Would be interesting to know how much margin buying is goin on there........

China.com.....? Klickt bitte hier um mehr Details zu dem wohl momentan interessantesten Markt weltweit zu erhalten. Ich würde zu gerne wissen in welchem Maße kreditfinanzierte Aktienkäufe in China genutzt werden.

The last six IPOs in China surged by an average 250% on their first day of trading.
China Construction Bank, which has traded in Hong Kong since October 2005, rose as much as 40% on its first day of trading in Shanghai in the world’s second-largest share sale this year
The stock traded 34% higher by mid-morning at 8.67 yuan, giving the Beijing-based bank a value of $218bn. Chinese investors, undeterred by high valuations for traded companies, are clamoring for IPOs as returns on bank savings lag the nation’s inflation rate.
China Shenhua Energy Co., the nation's largest coal producer, attracted a record of more than 2.6 trillion yuan ($350 billion) in orders for its Shanghai share sale, said two people with direct knowledge of the transaction.
Shenhua drew 1.9 trillion yuan from institutional investors and more than 700 billion yuan from individuals seeking the stock, the people said, citing preliminary tallies and asking not to be identified before an official announcement. Beijing-based Shenhua will sell as many as 1.8 billion shares at between 34.99 yuan and 36.99 each, it said Sept. 23.
Chinese investors, undeterred by the world's highest valuations for traded companies, are rushing to buy into a stock market that has almost tripled in size this year as returns on bank savings lag behind inflation.
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Blogger jmf said...

John Mauldin

Indeed, as everyone knows, policymakers in China are very keen on preventing the RMB from rising too fast. As a result, money supply growth has been growing above and beyond the PBoC's targets. Indeed, imagine a property developer in Shanghai, or a widget manufacturer in Guangzhou. How should our budding capitalist finance his next project/factory? Should he a) borrow RMB? b) borrow HK$, or c) borrow US$? Obviously, given the widespread belief that the RMB can only rise against the US$, and given that the HK$ is pegged to the US$, borrowing in either HK$ or US$ makes all the sense in the world.

So thereby, the Chinese private sector borrows HK$ or US$, exchanges them for RMB, thus forcing the Chinese central bank to print a lot more money than it wishes to. And given that there exists no domestic bond market to speak of, the PBoC struggles to sterilize this FX intervention. The end result is thus: a) very rapid money growth in China and b) a pace of accumulation of reserves which far outshines the growth in China's FDI and trade surplus. Together, this leads to the kind of asset price appreciation and economic boom that we have lately seen in China.

Of course, with inflation accelerating (August CPI came in at +6.5%), this state of affairs can not continue. But what can the PBoC do? Raise interest rates as it has been doing since late '04? But won't that make foreign liquidity flows into China even stronger? Who in their right mind would borrow RMB at the official lending rate of 7.29% if they can borrow US$ at 4.75% (of course, not everyone in China can borrow US$, but foreign multinationals, HK property developers etc... definitely can)? If the PBoC raises rates again, won't it further encourage the massive US$ carry-trade pictured above?

So far, the Chinese authorities' response has been to loosen up capital exporting rules in the hope that some of the excess money currently being created in China would find its way out of the Chinese economy (first to Hong Kong and, from there, to the rest of the world). But is this happening fast enough to stem China's rising inflationary pressures? So far, it hasn't. And with the Fed now engaged in a new easing cycle, which the PBoC simply cannot afford to follow, it is rapidly becoming crunch time for the RMB. Either the RMB will have to rise a lot in the near future, or the Chinese authorities will have to find some clever way of exporting massive amounts of excess capital. Either way, it is pretty good news for our favourite market: Hong Kong.

9:45 PM  
Blogger jmf said...

Citic Surpasses Lehman, Schwab as Chinese Savings Power Stocks

Citic Securities Co. is the fastest- growing brokerage firm in the world thanks to the booming market for Chinese stocks, and Wall Street may have to get used to the industry neophyte challenging Goldman Sachs Group Inc., Morgan Stanley and Merrill Lynch & Co. as the biggest.

Founded just 12 years ago, Beijing-based Citic now has a market capitalization of $39.4 billion, or $7.6 billion more than Lehman Brothers Holdings Inc., $23.1 billion more than Bear Stearns and $15.1 billion more than Charles Schwab Corp., after rising threefold in 2007. Haitong Securities Co., China's No. 2, also eclipsed Bear Stearns as the seven largest U.S. brokers lost $37 billion in value this year.

year ago, Wall Street firms occupied the top five slots while China had none in the top 10. Now Citic has claimed the No. 4 position and Haitong, at $20.1 billion, is No. 8. Only Goldman, Morgan Stanley and Merrill Lynch remain larger than Citic

China's benchmark CSI 300 Index has climbed 167 percent in 2007, the best performer among 89 global equity indexes tracked by Bloomberg. Investors in China have opened 46 million trading accounts this year, nine times the total for 2006. That has swelled the total to 125 million accounts.

Citic is valued at 33 times estimated earnings, compared with 10 times profit for Bear Stearns, 7.9 times for Morgan Stanley, and Lehman's 8 times. Haitong Securities trades at 47 times estimated profit, Hong Yuan at 38 times, while Northeast Securities trades at 28 times profit.

At least they probably don´t have to maker their earnings with level 2 and 3 accounting guesstimates..... :-)

10:16 PM  

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