ChinaScope Daily Dim Sum

Friday, November 30, 2012

Revenue of Big Four Banks May Drop CNY 6 Bn on Lower Card Transaction Charges

Source: The Beijing News, ChinaScope Financial (Data)

+ China’s Central Bank has required banks to cut bank card transaction fees starting from February 25, 2013. The bank card transaction fees for retailers in food & beverage and entertainment industries may be cut by 37.5 percent, while that for other retailers may be reduced by 22 to 24 percent. As a result, China’s four major state-owned banks may lose CNY 6 billion a year from lost card transaction revenue.

+ Industry insiders said that currently, bank card fees primarily consist of transaction fees and annual fees, with the former accounting for a larger share.

+ Earlier semiannual reports show that Industrial and Commercial Bank of China (1398: HKG: 601398: SHA), Bank of China (3988: HKG; 601988: SHA), Agricultural Bank of China (1288: HKG; 601288: SHA), and China Construction Bank (0939: HKG; 601939: SHA) pulled in a combined CNY 30.04 billion from bank card fees in 12H1, of which about CNY 15 billion were derived from bank card transaction fees.

Lower card fees might be an attempt by the government to stimulate domestic consumption. Fee income accounts for an increasing share of banks’ operating income, and the lower card fees are therefore, together with Interest rate cuts, threatening to erode bank profitability.

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Goldman Sachs Unloads Geely Stock

Source: Company Disclosure, ChinaScope Financial (Data)

+ GS Capital Partners VI Fund L.P., a private equity fund owned by Goldman Sachs, is seeking to raise HKD 1.98 to 2.04 billion by selling 600 million Geely Automobile Holdings Ltd.’s (0175: HKG) shares at a price range of HKD 3.30-HKD 3.40 per share. The price reflects a discount of 5.0 to 7.8 percent to the Hong Kong-listed stock's yesterday closing price of HKD 3.58.

+ According to the latest announcement made by Geely, it has been notified by GS Capital Partners VI Fund L.P. to convert approximately HKD 873.88 million worth of convertible bonds (CBs) to a total of 470 million common shares at the conversion price of HKD 1.8583 apiece. In addition, GS Capital Partners VI Fund L.P. transferred warrants into approximately 299.53 million shares at a strike price of CNY 1.9816 apiece. Thus, GS Capital Partners VI Fund L.P. has more than 700 million common shares on hand.

+ After Goldman launched the share sale plan, Geely fell as much as 4.5 percent and closed at HKD 3.54 today, a 1.12 percent loss.

Sales of Geely (175: HKG) has accelerated in 2012, and is expected to remain high due to the company’s expansion into the fast-growing SUV segment. The strong performance has elevated stock prices, thereby profiting Goldman Sachs after its three-year investment.

Monday, November 26, 2012

Chinese Yuan Hits Upper Limit for 17th Time in 19 Trading Days

Source: NetEase, ChinaScope Financial (Data)

+ The USD/CNY spot rate once again hit the daily upper limit of 6.2277 during today’s intraday hours. This is the 17th such occurrence in the recent 19 trading days, with only November 16 and November 21 not seeing the spot rate reach its upper limit. The People’s Bank of China today set the USD/CNY central parity rate at 6.2906, 12 basis points stronger than the 6.2918 of the previous trading day.

+ The excess liquidity caused by quantitative easing in the world’s major economies and stronger investor confidence in China’s economic rebound have weighed heavily on RMB appreciation. Meanwhile, the PBOC has also reduced market intervention and strengthened the role of the market in the determining of exchange rates. This will not only promote China’s market-oriented exchange rate reforms, but also help improve the structure of Chinese foreign exchange reserves.

The yuan has hit the upper limit of its trading span against the US dollar 17 times over the last 19 trading days, possibly reflecting increased investor confidence in the Chinese economy. That market forces are allowed to play a bigger role in deciding the yuan value is seen as an important step towards greater internationalization of the Chinese currency.

Thursday, November 15, 2012

China Oct Trade Surplus USD 31.99 Bn, 45-month High

Source: General Administration of Customs, ChinaScope Financial (Data)

+ According to data published by the General Administration of Customs on November 10, China’s exports for October grew 11.6 percent year-on-year, the most in five months, to USD 175.57 billion. Imports increased 2.4 percent year-on-year to USD 143.58 billion. October trade surplus hit a 45-month high of USD 31.99 billion.

+ In the first ten months of 2012, China’s exports grew 7.8 percent year-on-year to USD 1.67 trillion, while imports increased 4.6 percent year-on-year to USD 1.49 trillion, resulting in a trade surplus of USD 180.23 billion.

+ In the January-October period, China’s trade with the European Union fell 3 percent year-on-year to USD 452.83 billion. Trade with the US increased 9.1 percent year-on-year to USD 396.09 billion. Trade with Japan was USD 275.47 billion, down 2.1 percent year-on-year.

China’s trade surplus continued to widen in October as export growth accelerated to 11.6 percent while import growth remained at modest 2.4 percent. Higher export growth is the most recent of many signs indicating that China’s economic growth might be picking up in 12Q4.

Monday, November 5, 2012

China Launches Anti-dumping Probe into Polysilicon Products from EU

Source: Ministry of Commerce, ChinaScope Financial (Data)

+ The Ministry of Commerce (MOFCOM) announced today that it has decided to launch an anti-dumping probe into solar-grade polysilicon products imported from EU.

+ The probe is expected to improve the stock market performance of some listed Chinese polysilicon manufacturers.

Severe excess supply has caused 90 percent of Chinese polysilicon producers to shut down production. Since China currently is the only major source of polysilicon demand, it is unlikely that trade barriers will prevent exporters from selling to China and the domestic shutdowns implies that China will have no choice but to accept higher import prices.

Tuesday, October 30, 2012

Sinopec: Jan-Sep Net Profit Down 30 Percent YoY to CNY 41.95 Bn

Source: Company Disclosure, ChinaScope Financial (Data)

+ According to the financial results released by China Petroleum & Chemical, also known as Sinopec (SNP: NYSE; 0386: HKG; 600028: SHA), on October 28, the company’s net profit attributable to shareholders in the January-September period decreased 30 percent year-on-year to CNY 41.95 billion, equivalent to a daily earning of CNY 153 million. Net profit attributable to shareholders in 12Q3 was CNY 18.25 billion, down 7.5 percent year-on-year.

+ Sinopec said the decrease in net profit was primarily due to rising prices of chemical raw materials and decreasing oil product prices.

+ In the first three quarters of 2012, Sinopec’s oil and gas production reached an equivalent of 318 million barrels of oil, representing a year-on-year growth of 4.92 percent. Crude oil production was 245 million barrels and natural gas production was 438.4 billion cubic feet, up 2.32 percent and 14.69 percent year-on-year respectively.

+ The oil refiner’s daily crude oil processing volume in the January-September period increased 0.46 percent year-on-year to 4.39 million barrels, while its total sales volume and retail sales volume of oil products was 128 million metric tons and 81 million metric tons, up 5.56 percent and 7.28 percent year-on-year respectively. However, the production of ethylene and synthetic resin decreased 4.51 percent and 1.10 percent year-on-year respectively

Increase in development, sales and financial expenses have eroded Sinopec’s margins and caused negative net profit growth since 11Q3. In the recent quarter, better control of operating and non-operating expenses has reversed the downward trend.

GDP Growth in 24 Regions Outpaces National Average in Jan-Sep

Source: Chinanews, ChinaScope Financial (Data)

+ As of October 28, 27 Chinese municipalities and provinces have released their economic data for the first three quarters of 2012. In the January-September period, GDP growths in 24 regions surpassed the national average growth of 7.7 percent year-on-year. In comparison to the national average growth, GDP growth of the Zhejiang province was identical, whereas GDP growths for both Beijing and Shanghai were lower.

+ Tianjin’s GDP grew 13.9 percent year-on-year, the highest among Chinese municipalities and provinces. GDP of Chongqing and Guizhou was up 13.8 percent year-on-year respectively, the second highest among the 27 regions, while that of Shanghai was the lowest at 7.4 percent.

+ In terms of gross economic output, Guangdong’s CNY 4.07 trillion was on the top, followed by Jiangsu’s CNY 3.88 trillion and Shandong’s CNY 3.62 trillion.

GDP growth in China’s central and western regions continued to outpace that of the Eastern provinces in the first three quarters of 2012. While the western regions are increasingly acting as the engine of China’s growth, the high numbers also reflect the substandard quality of provincial data.