ChinaScope Daily Dim Sum

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.

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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.

Exchange Loss Weighs on Airline Companies

Source: China Business News, ChinaScope Financial (Data)

+ According to Civil Aviation Administration of China, total profit of Chinese airline companies stood at CNY 5.83 billion in August, down 17 percent year-on-year and lower than CNY 6.4 billion in July.

+ Analysts pointed out that exchange loss is the main reason for profit decline in airline companies. In August, the exchange loss in the airline industry reached CNY 560 million, a turnaround from an exchange gain of CNY 1.48 billion in the same period last year.

+ In August, the CNY exchange rate against USD depreciated 0.205 percent. The depreciation cumulated to 0.39 percent in the first half of this year.

+ Currently, USD is the major currency used for aircraft purchase in the world, so the largest portion of Chinese airline companies’ debts are settled in USD.

Driven by higher passenger traffic growth, transport turnover in the airline industry recovered some over the summer.