ChinaScope Daily Dim Sum: 2012

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.

Profit of Industrial Enterprises Up 7.8 Percent YoY in Sep

Source: National Bureau of Statistics, ChinaScope Financial (Data)

+ According to data released by the National Bureau of Statistics on October 27, the profit of industrial enterprises above designated size (with annual revenue of above CNY 20 million) in September was CNY 464.3 billion, up 7.8 percent year-on-year, a turnaround from the five straight month growth slide.

+ The profit of industrial enterprises above designated size in the January-September period was CNY 3.52 trillion, down 1.8 percent year-on-year, 1.3 percentage points lower than the decline in the January-August period. The enterprises’ prime operating revenue increased 10.2 percent year-on-year to CNY 65.72 trillion.

+ In the January-September period, the profit of state-owned and state-controlled enterprises was CNY 1.01 trillion, down 11.8 percent year-on-year, while that of private enterprises increased 15.6 percent year-on-year to CNY 1.09 trillion.

Supported by demand from fiscal stimulus projects, profit growth of industrial enterprises above designated size improved in September.

Wednesday, October 24, 2012

China Mobile: 12Q1-Q3 Net Profit CNY 93.3 Bn, Up 1.4 Percent YoY

Source: Company Disclosure, ChinaScope Financial (Data)

+ According to the 12Q3 results of China Mobile (0941: HKG; CHL: NYSE), the company’s operating revenue and net profit in the first three quarters were CNY 408.6 billion and CNY 93.3 billion, up 6.4 percent and 1.4 percent year-on-year respectively.

+ Over the 12Q1-Q3 period, the company’s monthly net addition of subscribers exceeded an average of 5.4 million. Total number of 3G subscribers reached 75.6 million in the reporting period. It reported the average revenue per user (ARPU) of CNY 67.

+ China Mobile is said to raise its 2012 earnings target in order to appear more favorable ahead of the performance appraisal to be administered by the State-owned Assets Supervision and Administration Commission at the end of this year. However, China International Capital Corporation (CICC) estimated that the company may not perform so well in the last quarter of 2012 due to competition in the middle- and low-end market and the launch of iPhone 5. China Mobile is behind its competitors in distributing iPhones in mainland China.

+ Related Data: Company Data

Compared with last year, average user revenue remains low due to tight government regulation on telecom prices. Wireless data traffic of China Mobile (0941: HKG; CHL: NYSE) continues its strong momentum driven by the company’s efforts to expand in the 3G market.

Wednesday, October 17, 2012

China Encourages Enterprises to Improve Export Structure

Source: Xinhua, ChinaScope Financial (Data)

+ CHEN Deming, China’s Minister of Commerce, stated on October 15 that local commerce regulatory bodies should implement the foreign trade stabilization measures introduced by the State Council earlier. Furthermore, Chinese foreign trade enterprises should improve the structure of their export products in the face of complicated and grim foreign trade situations.

+ In early September, the State Council introduced a series of measures to stabilize foreign trade growth. These measures include the acceleration of export tax rebates process, expansion of export credit insurance, and simplification of administrative procedures, to name a few.

Amidst fettering global demand, policy makers have intensified support to the export sector through vehicles such as tax rebates. September’s surprisingly high export growth suggests that the measures have garnered some success.

Friday, October 12, 2012

TCL’s LED TV Sales Surge in Sep

Source: Company Disclosure, ChinaScope Financial (Data)

+ TCL Corp. (000100: SHE) announced that the sales of LCD TVs in September increased 43.8 percent year-on-year to a monthly-high of 1.9 million sets. During that same time period, 1.53 million LED TVs were sold, equaling 80.5 percent of total sales volume of LCD TVs.

+ Among TCL’s total LCD TV sales were 1.19 million sets (up 37.5 percent) sold in the Chinese market in September, and 705,800 sets (up 55.8 percent) sold in overseas market.

In the rapidly growing smart TV market, Skyworth Digital Holdings (0751: HKG) is quickly catching up with TCL Corp. Since the smart TVs are android based, entry barriers are low and the competition fierce.

Lenovo Bests HP in PC Shipment in 12Q3

Source: Netease, ChinaScope Financial (Data)

+ According to Gartner Research, Lenovo Group (0992: HKG) shipped 13.77 million units, accounting for 15.7 percent in the global PC market in 12Q3. With the result, the company has replaced HP as the top PC manufacturer in the world.

+ In the same quarter, HP shipped 13.55 million units for 15.5 percent of the market share.

Lenovo (0992: HKG)’s market share gain can be attributed to their low prices which are reflected in the company’s relatively modest gross margins. It is notable that net margins returned to positive after Mr. Liu’s return as chairman in 2009.

PetroChina to Invest CNY 3.2 Bn in Xinjiang

Source: Xinjiang Daily, ChinaScope Financial (Data)

+ Construction of PetroChina’s (PTR: NYSE; 0857: HKG; 601857: SHA) chemical fertilizer project located in the city of Aksu in Xinjiang started yesterday. Total investment in the project will be CNY 3.2 billion.

+ Upon completion in 2015, the chemical fertilizer project will produce 450,000 metric tons of synthesis ammonia and 800,000 metric tons of urea annually. PetroChina’s sales revenue derived from the project is expected to be approximately CNY 1.3 billion a year, and its profit and tax gained from the project will likely exceed CNY 80 million a year.

Urea production is only a tiny part of PetroChina’s (PTR: NYSE; 0857: HKG; 601857: SHA) business, but the fertilizer industry is a strategic focus of the government as it supports the agricultural sector and makes it possible to utilize coal in regions with lack of transportation.

Thursday, October 11, 2012

Vanke: Sep Sales Value CNY 12 Bn, Down 3.76 Percent YoY

Source: Company Disclosure, ChinaScope Financial (Data)

+ According to the sales results released by China Vanke (000002: SHE), the company’s sales volume was 1.05 million square meters in September, down 2.78 percent year-on-year, and sales value was CNY 12.04 billion, down 3.76 percent year-on-year.

+ Over the first nine months of this year, China Vanke made 9.08 million square meters in sales volume, up 7.93 percent year-on-year, and CNY 96.32 billion in sales value, down 0.78 percent year-on-year.

+ In September, the company launched nine real estate projects, which are located in the cities of Guangzhou, Dongguan, Qingdao, Qinhuangdao, Kunshan, Guiyang, and Kunming.

+ Related Data: Company Data

China Vanke (000002.SHE)’s land purchases have returned to last year’s level, reflecting restored faith in the sector and the company’s strong cash position.

China Mobile to Invest CNY 180 Bn in 4G Base Stations

Source: Economic Information Daily, ChinaScope Financial (Data)

+ China Mobile (CHL: NYSE; 0941: HKG) said that the company will start a full-scale 4G network development in 12H2. It is planning to purchase TD-LTE 4G equipment in 100 cities in China and build 180,000 base stations in 2013 to bring the total number of 4G stations to 200,000. Construction of the new base stations will cost approximately CNY 180 billion.

+ Apart from China Mobile, China Telecom (CHA: NYSE; 0728: HKG) and China Unicom (CHU: NYSE; 0762: HKG) will also accelerate their commercial use of 4G network. Both companies have announced that they will launch trial operations of 4G network and test its commercial applications in Shanghai and other cities.

+ The Ministry of Industry and Information Technology and Chinese Academy of Sciences estimated that CNY 500 billion worth of investments will be stimulated during the post-4G stage. After 4G service is ready for commercial use, 4G-related software development and devices manufacturing will also generate more than CNY 1 trillion in output value.

+ Related Data: Company Data

Among China’s three telecom operators, China Mobile (CHL: NYSE; 0941: HKG) is leading the 4G network development. In 2012 the company is expected to finish 20,000 4G base stations in nine different cities.

Wednesday, September 26, 2012

Land Market Heats Up Since Aug

Source: Economic Information, ChinaScope Financial (Data)

+ According to latest data, China Vanke (000002: SHE) has acquired 17 land parcels since August. Meanwhile, China Vanke, China Resources Land (1109: HKG), and China Merchants Property Development (000024: SHE) have spent CNY 13.4 billion, CNY 5.4 billion and CNY 4.5 billion, respectively, on land purchase since August, surpassing the total figure over the first seven months.

+ Industry insiders say that the large-scale land purchases among developers since August was seen for the first time since China started policy control on the property market in 2011. After destocking land reserves over the past 20 months, developers are in urgent need to replenish their land reserves for future development. Furthermore, the financial status of developers has improved given the recovering housing transactions over the past months and local governments’ increasing land supply, which heats up the land market to some extent.

Vanke (000002: SHE) and Longfor (0960: HKG) are leading the recent acceleration in land acquisitions.

Tuesday, September 25, 2012

Total Assets in Banking Industry Increase CNY 100 Tn over the Past Decade

Source: Caijing, ChinaScope Financial (Data)

+ According to data released by China Banking Regulatory Commission, total assets in China’s banking industry were CNY 122.92 trillion at the end of July 2012, compared to CNY 23.7 trillion at the end of 2002.

+ Aside from a 14 percent growth in 2004, banks’ total assets grew at an annual rate of more than 17 percent over the last ten years. The figure exceeded CNY 50 trillion to CNY 53.1 trillion in 2007, while it surpassed CNY 100 trillion to CNY 111.5 trillion in 2011.

+ In addition, China’s five major commercial banks (Bank of China, Industrial and Commercial Bank of China, Agricultural Bank of China, China Construction Bank, and Bank of Communications) accounted for approximately 90 percent of the total assets in China’s banking industry in 2002, while the figure dived to 45 percent at the end of July 2012.

The steadily declining leverage ratio has now almost reached Basel level, recent increases in overdue loans might however cause asset erosion in the near future.

BAIC to Launch IPO in Hong Kong

Source: National Business Daily, ChinaScope Financial (Data)

+ XU Heyi, Chairman of Beijing Automotive Group (BAIC Group), said at the 2012 Summer Davos that its subsidiary, Beijing Automotive Industry Holding Co., Ltd. (BAIC), is planning to list in Hong Kong next year. BAIC is expected to raise roughly CNY 10 billion for the development of its passenger vehicle business.

+ In May 2007, BAIC Group was planning for an IPO in Hong Kong to raise USD 1 billion; however, it changed its plan to focus on the A-share market instead in March 2008.

+ In early September, China’s auto makers performed a crash test after the industry standard was updated. The two E-Series models of BAIC Motor received a 3-star and 2-star ratings, which shows that technologies and qualities of the brand still have room for improvement. In the June-August period, the company sold more than 2,000 E-Series models each month.

Beijing Automotive Group is once again preparing for an IPO, the proceeds of which will be used to develop the company’s own passenger car.

Monday, September 24, 2012

Retail Prices of Moutai Increase More Than CNY 200

Source: China Economic Net, ChinaScope Financial (Data)

+ The 53-degree Flying Moutai of Kweichow Moutai (600519: SHA) was offered in supermarkets at around CNY 1,800 a bottle, much higher than the manufacturer suggested retail price (MSRP) of CNY 1,519.

+ On September 3, Moutai raised the ex-factory prices of some of its liquor products by 20-30 percent but kept the MSRP the same. Consequently, distributors’ margin was narrowed.

+ Unlike in previous occasions, the price hike of Moutai has yet to cause a chain effect among its competitors, including Wuliangye Yibin (000858: SHE), Jiangsu Yanghe Brewery (002304: SHE), and Lu Zhou Lao Jiao (000568: SHE).

The margin between ex-factory and retail price of Chinese luxury brand liquor is extremely thick, so price hikes might not immediately pass through to consumers. However, the move might be a preparation for future retail price increases.

Property Tax Pilot Will Expand Nationwide, Taxation Official Says

Source: China Securities Journal, ChinaScope Financial (Data)

+ CONG Ming, an official with the State Administration of Taxation, said on September 20 that the scope of the property tax pilot will be expanded further and the real estate tax system will be gradually set up. The property tax pilot is expected to enter more cities at the end of this year or at the beginning of next year, eventually reaching nationwide implementation.

+ CONG pointed out the difference between property tax and real estate tax. Property tax, aiming to enhance housing market control and curb speculation activities, is collected based on the original value of a property. Real estate tax, however, is collected based on the appraised value, which includes the land cost, and is not for market control purpose.

The expansion of the property tax scheme might put additional downward pressure on the property market, although prices and transaction volumes have proven very resilient to controlling policies.

Friday, September 21, 2012

China’s Big Four Banks Issue CNY 219.2 Bn New Loans in Aug

Source: People’s Bank of China, ChinaScope Financial (Data)

+ According to data released by the People’s Bank of China (PBOC) on September 18, in August, approximately CNY 219.2 billion in new loans was offered by China’s four major state-owned banks: Industrial and Commercial Bank of China (1398: HKG: 601398: SHA), Agricultural Bank of China (1288: HKG; 601288: SHA), Bank of China (3988: HKG; 601988: SHA), and China Construction Bank (0939: HKG; 601939: SHA). The figure was lower than CNY 237.2 billion in new loans offered in July.

+ In August, new short-term loans issued by China’s big four banks were CNY 39.89 billion, accounting for 18.91 percent of the total; new mid- and long-term loans were CNY 127.1 billion, 58 percent of the total.

+ By the end of August, total deposits in the four major banks were CNY 40.92 trillion, increasing slightly by CNY 57.47 billion month-on-month, a turnaround from a month-on-month decrease of CNY 909.4 billion in July.

The share of loans and deposits held by the big four banks continued to decrease in August. Although the government is encouraging long-term loans, it will take some time for a maturity composition change to materialize.