ChinaScope Daily Dim Sum: July 2012

Tuesday, July 31, 2012

Suning Appliance: Operating Profit Down 36% YoY in 12H1; Online Business Up 106%

Source: Company Disclosure, ChinaScope Financial (Data)

+ According to the interim report released by Suning Appliance Co., Ltd. (002024.SZ), company operating revenue was CNY 47.19 billion in 12H1, up 6.7% year-on-year, operating profit was CNY 2.18 billion, down 36.0% year-on-year and net profit attributable to shareholders was CNY 1.75 billion, down 29.5% year-on-year.

+ In 12H1, revenue derived from the online sales platform “suning.com” surged 105.53% year-on-year to CNY 5.28 billion (tax included).

Challenged by online retailers, Suning has decided to focus on the development of Suning.com. However, the management might have underestimated the market competition. In first half of 2012, gross transaction value on Suning.com was CNY 5.28 billion, only half of the semi-annual guidance.

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China's Ministry of Railways Issues Bonds Worth CNY 27 Bn Today, 18% of Annual Target

Source: China Bond, ChinaScope Financial (Data)

+ The Ministry of Railways (MOR) will auction CNY 27 billion bonds today. This is the MOR’s third bond issuance in 2012; CNY 20 billion and CNY 18 billion bonds were issued in June and early July, respectively.

+ The State Council and the National Development and Reform Commission have allowed the MOR to issue a record high of CNY 150 billion bonds in 2012.

Asset growth is outpacing revenue growth, leading to decline in the gross margin.

High fixed assets investments have necessitated increase in debt taking, most of which is from domestic long-term loans.

PBOC: Small Credit Companies’ New Loans CNY 97.7 Bn in 12H1

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

+ China’s Central Bank disclosed on July 30 that the country has 5,267 small credit companies in operation as of June 30, with a total of 58,400 employees. Outstanding loans in small credit companies were CNY 489.26 billion in 12H1 and new loans issued were CNY 97.7 billion.

+ Small credit companies in Jiangsu province recorded CNY 71.61 billion paid-in capital and CNY 96.91 billion outstanding loans – the highest in China. Inner Mongolia showed the highest number of small credit companies with 436, closely followed by Jiangsu and Anhui with 430 and 424 companies.

Recent regulatory policies aimed at taming the small credit company industry might have caused the 12Q2 growth decline. With loans mainly extended to SMEs, provinces with dynamic private sectors such as Jiangsu and Zhejiang account for the largest share of small credit loans.

Monday, July 30, 2012

The Scale of China’s Internet Economy Reaches CNY 94.34 Bn in Q2

Source: iResearch, ChinaScope Financial (Data)

+ Latest data from iResearch shows that the size of China’ internet economy reached CNY 94.34 billion in the second quarter of 2012, a year-on-year increase of 66.1%.

+ In terms of different markets segments, the SME B2B and the search engine market underperformed the industry average, while the mobile shopping market continued its explosive growth, up 487.9% year-on-year.

In China’s growing internet economy, SME B2B and PC Search Engine markets are growing only modestly, while mobile online shopping is enjoying strong growth. Taobao is claiming the lion’s share of this booming market.

Industrial Enterprise Profit Down 1.7% YoY to CNY 468.2 Bn in June

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

+ According to data released by the National Bureau of Statistics on July 27, profit of industrial enterprises above designated size (with annual revenue above CNY 20 million) was CNY 2.31 trillion in 12H1, down 2.2% year-on-year, the growth rate down by 0.2 percentage points (ppt) on the January-May period. Operating revenue increased 11.3% year-on-year to CNY 42.60 trillion.

+ In June, profit of industrial enterprises above designated size dropped 1.7% year-on-year to CNY 468.2 billion.

+ In 12H1, state-owned and state-controlled enterprises made CNY 690.5 billion in profit, down 10.9% year-on-year. Profit of joint-stock enterprises fell 0.4% year-on-year to CNY 1.36 trillion. Foreign-invested (including Hong Kong, Macau and Taiwan invested) enterprises made CNY 522.1 billion in profit, down 13.4% year-on-year. Profit of privately-owned enterprises increased 16.5% year-on-year to CNY 694.7 billion.

Hard hit by slowdown in the real estate sector, the industrial sector posted negative profit growth in 12H1. Loss making by state-owned enterprises continues to drag down overall industry profitability.

Monday, July 23, 2012

Value of China’s Logistics Reaches CNY 83.6 Tn in 12H1, Up 10% YoY

Source: China Federation of Logistics and Purchasing, ChinaScope Financial (Data)

+ China Federation of Logistics and Purchasing and China Logistics Information Center jointly reported on July 21 that the total value of China’s logistics reached CNY 83.6 trillion in 12H1, up 10% year-on-year. The 2012 estimate for China’s logistics is 11%, supporting a 7-8% GDP economic growth.

+ In 2012H1, spending on logistics totaled CNY 4.1 trillion, up 11.9% year-on-year, down 6.4 percentage points from 2011H1. The logistics spending-to-GDP ratio was 18%, maintaining the level of last year.

The cooler economic climate shows up in lower logistics value growth.

The ratio of logistics spending to GDP remained high in 12Q2, extending cost pressure to manufactures.

Competition in SUV Market Intensifies Amidst Strong Growth

Source: China Business Journal, ChinaScope Financial (Data)

+ In 12H1, the volume of SUV sales increased to 952,600, a growth rate of 28.4% year-on-year, up from the 23.6% in 2011. The 12H1 SUV growth vastly outpaced the 7.08% of passenger vehicles.

+ Given the rapid demand growth in the SUV market, automobile manufacturers are optimistic about future sales. 20 new SUV models will be released soon, all of which are believed to intensify competition in the domestic market.

The sales momentum of SUVs was particularly strong in May and June, where it showed growth rates three times that of passenger vehicles.

YI Gang: CNY Exchange Rate Close to Equilibrium

Source: Sina, ChinaScope Financial (Data)

+ YI Gang, Deputy Governor of the Central Bank and Director General of the State Administration of Foreign Exchange, pointed out on July 21 that the CNY exchange rate is close to its equilibrium and that it is expected to remain at this level in the foreseeable future.

+ China’s foreign exchange reserves were stable in 2011. People interpret this as a result of less Central Bank intervention, improved demand and supply conditions, and less volatile capital in and outflows.

Due to the higher inflation rate in China compared to most of its major trade partners, the real appreciation of CNY was quicker in the past two years, pushing CNY exchange rate to its equilibrium quicker than expected.

Real CNY appreciation against industrialized economies currencies is accelerated by higher inflation in China. In relation to emerging market economies currencies, China’s inflation is markedly lower and so is the real appreciation.

GDP Growth in Central and Western China Exceeds 10% in 12H1

Source: China Business News, ChinaScope Financial (Data)

+ As of July 22, 20 provinces and municipalities in China have released their semi-annual GDP data, showing that Guangdong province continues to lead in terms of GDP value and that the highest growth is found in Guizhou province with 14.5% YoY in 12H1. The lowest GDP growth was recorded in Beijing with 7.2%.

+ According to the data released so far, provincial GDP growth in central and western regions exceeds 10%, while the rates are below 10% in most eastern regions, except for Tianjian and Fujian, which recorded growth of 14.1% and 11.4%, respectively.

Inland regions are increasingly driving China’s economic development.

Friday, July 20, 2012

Number of Chinese Internet Users Reaches 538 Million

Source: China Internet Network Information Center, ChinaScope Financial (Data)

+ According to a report published by the China Internet Network Information Center on July 19, as of June 30, 2012, the number of Chinese internet users had reached 538 million. Of these, 388 million are mobile user accounts, an increase of 32.70 million, or 2.9 percentage points, compared to the end of 2011.

+ In comparison, the number of people using desktop computers for internet access in 12H1 reached 380 million. Hence mobile access has become the most popular way for Chinese internet users to browse the web.

In 12Q1, the number of internet users from mobile terminals surpassed that of desktop PC users, providing increased business opportunities for services such as O2O and location based services. The number of IPv6 addresses owned by China now ranks 3rd in the world.

Average time per week spent on internet reached a two-year high in 12H1. The popularity of micro-blogging has quickly exceeded that of social networks.

China CNR: CNY 3.49 Bn Worth of Contracts Signed Recently

Source: Company Disclosure, ChinaScope Financial (Data)

+ China CNR Co., Ltd. (601299.SH) announced on July 18 that the company has signed a number of major contracts recently with a total value of CNY 3.49 billion, which accounts for approximately 3.94% of its operating revenue from core business in 2011.

The downward trend of China Northern Railway’s revenue growth might be reversed by the new contract.

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Air China: 12H1 Net Profit Expected to Drop More Than 50% YoY

Source: Company Disclosure, ChinaScope Financial (Data)

+ Air China Ltd. (601111.SH) publicized a preview of its 12H1 performance on July 17, showing that the company’s net profit attributable to shareholders is expected to fall more than 50% year-on-year in the first half of 2012.

+ The sharp decrease in net profit is mainly attributable to slower growth of domestic demand, sluggish international demand and higher fuel prices. Furthermore, the company’s exchange earnings also declined significantly.

Slow down in RPK growth and higher fuel prices have caused the downward trend in Air China’s revenue growth.

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WEN Jiabao: More Efforts Will Be Made to Boost Employment

Source: Caijing, ChinaScope Financial (Data)

+ Chinese Premier WEN Jiabao stated on July 17 that China will give priority to job creation and implement more active employment policies. In accordance with this goal, employment development will be included in the performance assessment of local governments.

China’s urban labor demand-supply ratio remained above 1 in 12Q2 indicating that demand for labor outstrips supply. Urban wage growth remains steady.

Average Price of New Residential Property Falls in 21 Cities in June

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

+ Today, the National Bureau of Statistics (NBS) released June data on housing prices in 70 medium and large-sized cities.

+ Compared with last month, new commodity residential property prices fell in 21 cities in June, remained unchanged in 24 cities, and increased in 25 cities. The growth rates of prices in the 25 cities with price increased were all lower than 0.6%.

+ In terms of resale residential housing prices, June saw month-on-month declines in 19 cities, no change in 20 cities, and increases in 31 cities. The growth rates of prices in the 31 cities with increases were all lower than 1.1%.

The average price of new housing increased month-on-month in 25 out of 70 cities in June.

The average price of resale housing dropped month-on-month in 19 out of 70 cities in June.

China Increases Holdings of U.S. Treasury Securities by USD 25.6 Bn in April - May

Source: US Treasury, ChinaScope Financial (Data)

+ According to data released by the U.S. Department of the Treasury on July 17, China held a total of USD 1.17 trillion U.S. treasury securities at the end of May, USD 25.6 billion more than at the end of March.

Holdings of US treasury securities increased in April and May. US treasury securities accounted for 35.39% of China’s foreign exchange reserves in March.

Thursday, July 19, 2012

China Lottery Ticket Sales Revenue CNY 21.61 Bn in June, Up 23.8% YoY

Source: Ministry of Finance, ChinaScope Financial (Data)

+ According to data released by the Ministry of Finance on July 18, the value of lottery tickets sold in June totaled CNY 21.61 billion, an increase of CNY 4.16 billion, or 23.8% year-on-year.

+ Specifically, welfare lottery sales reached CNY 12.54 billion, increasing CNY 2.08 billion or 19.9% compared to the same period last year. China’s sports lottery sales amounted to CNY 9.08 billion, growing CNY 2.08 billion, or 29.8% year-on-year.

Despite slowdown in the macro economy, lottery sales remain stable. The seasonal effect of the spring festival is highly pronounced.

Macau Gaming Revenue Up 12% YoY in June

Source: Hexun, ChinaScope Financial (Data)

+ Data shows that Macau gaming industry revenue increased 7% year-on-year in May and grew 12% year-on-year in June.

+ In 2011, the total operating revenue of the Macau gaming industry was USD 34 billion. Compared to the 700% growth of gaming revenue in the period 2004 to 2011, the current growth is mediocre.

Cooler macroeconomic environment has led to slower growth in Macau's gaming revenue.

Macao's reduced popularity as a gambling destination has led to a decline in hotel occupancy ratio.

MOFCOM: Prices of Edible Agricultural Products Decline Slightly

Source: Ministry of Commerce, ChinaScope Financial (Data)

+ According to the data released by the Ministry of Commerce (MOFCOM) on July 18, prices of the key edible agricultural products decreased slightly between July 9 and 15, compared to last week. The wholesale prices of eight aquatic products dropped 0.4% from the previous week, marking three weeks of consecutive decline with a cumulative drop of 1.6%.

+ Last week, the wholesale prices of eighteen vegetable products fell 1.4% week-on-week but rose 6.1% year-on-year. The prices of radish, cabbage and Chinese cabbage declined 8.2%, 7% and 6.6%, respectively, compared to the previous week.

Increase in supply during the summer season has led to decreases in the price of aquatic products and vegetables in July. Compared to last year, prices have, however, increased.

Urban Disposable Income CNY 12,509 per Capita in 12H1, up 13.3% YoY

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

+ According to data released by the National Bureau of Statistics (NBS) on July 13, urban per capita income was CNY 13,679 in 12H1 while urban per capita disposable income was CNY 12,509, up 13.3% year-on-year. The per capita cash income of rural residents was CNY 4,303, up 16.1% year-on-year.

+ For urban residents, per capita wage was up 13.0% year-on-year, per capita government transfer income was up 13.4% year-on-year, per capita income from business operations were up 14.4% year-on-year, and per capita asset generated income was up 14.2% year-on-year.

Despite slow-down in the macroeconomic environment, the growth rate of disposable income and salary remains steady.

M2 Increases 13.6% YoY in June, up 0.4 ppt on May

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

+ Data released by the PBOC on July 12 shows that CNY deposits increased CNY 2.86 trillion in June, up CNY 954.2 billion on June 2011. In the first half of 2012, deposits from households increased by CNY 4.21 trillion, deposits from non-financial enterprises increased CNY 1.12 trillion, and fiscal deposits increased CNY 531.4 billion.

+ At the end of June, China's broadest measure of money supply, M2, was up 13.6% year-on-year to CNY 92.5 trillion, the growth rate up by 0.4 ppt from May’s 13.2% and equal to the growth rate in December 2011.

The growth of bank deposit is slow amidst lower deposit rates and increased competition from alternatives such as wealth management and trust products.

Second Quarter GDP Growth at 7.6% YoY

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

+ Data released by the National Statistics Bureau today shows that China’s GDP grew at 7.6% in 2012 Q2 equivalent to a seasonally adjusted quarter-on-quarter growth of 1.8 %.

+ Industrial value added grew at 9.5% year-on-year in June, up 0.76 ppt. on May.

China’s economy expanded at only 7.6% YoY in Q2, the slowest pace in three years. The CSF leading economic indicator bottomed in May, indicating that some economic improvement can be expected in August-September.