IF one asks you the following question: which stock market performs the worst in 2010? Probably very few people would think of China as the answer. In fact, China’s A share exactly delivered the worst performance in 2010. Based on MSCI indice, Hongkong stock market is one the leaders by delivering more than 15% annually, Read the rest of this entry »
Archive for December, 2010
When China will overtake US to become world’s No.1 biggest economy? Everybody seems to be interested or concerned. Here we embed a calculator from Economist and let you plug in the relevant parameters to reach your own conclusion.
On December 25th, People’s Bank of China announced to increase the benchmark interest rate by 25 basis points. This is the second time that China’s central bank has raised the interest rate in the past two months.
The timing of the announcement is well planned in order to minimize the shock to the market as most people are on holiday. However, it also shows a dilemma that PBOC is facing when they adjust the benchmark interest rates.
The decision makers in PBOC (or at even higher levels of China’s government) have a few factors to consider. To start with, potential inflation threat is on the top of the priority list that needs to be addressed. China’s inflation in Nov reached 5.1%, which is the highest in the past 2 years. Also in this year several food items, such as soybean, sugar and garlic in China either have gone through or are still at historical high price levels. The government has to be concerned by the price spike in such food items as they relate to the basic needs of every single citizen. Secondly, due to the fact that inflation continues to go up in China, the relative low nominal interest rate (1 year deposit rate at 2.75% after the last increase) results in a negative real interest rate. Such negativity leads to a disincentive for people to deposit cash in the bank. Instead, fearing that their bank deposit will lose the purchasing power in the coming future, the depositors are motivated by the government to either invest or speculate. A lot of such speculative capital flows into the equity and property market, which is well reflected in the property price in most big cities in China. In fact, the central government has launched numerous measures this year to curb the speculative activity in China’s property market. Read the rest of this entry »
China’s high dependency on domestic investment has been frequently criticized as one of the unsustainable status in the country’s economy. According to one of McKinsey’s recent reports, however, China’s capital stock per capita is still quite low compared to other nations. For example, as late as 2008, China has a capital stock of about 10,000 USD per capital, Read the rest of this entry »
China is one of the countries that offer the greatest incentives to electric cars in the world (Click HERE for a related Story). Based on the latest data, China offers an incentive of about 8800 US Dollar for every unit of electric cars, only second to Denmark who offers almost 20,000 USD for every unit of green car. Read the rest of this entry »
It looks likely that China’s bank loan this year will exceed the quota again. For 2010 China banks have a loan quota of 7.5 trillion RMB for the whole year. By the end of Oct, a total loan of 6.8 trillion has already been made. For 2 months to go before the year end, it would be very difficult for the country’s banks to keep the loan within the quota (Click HERE for an Article on this subject). Read the rest of this entry »
China’s government has launched a few measures to cool down the domestic property mania. One of the measures is to build more social housing (Click HERE for a Reuters Story). The social housing is built to be rented to the low income families who are unable to afford to buy their own home. Accoridng to the release from NDRC, in 2010 the government will increase the building of social housing to about 5 million units, Read the rest of this entry »
How does China’s PE get out of their investment? The answer is simple: IPO. In 2010 up till November, 86.1% of the nation’s PE exit their investment through IPO. There are also other types of exits such as M&A, Ownership transfer and Buy Back. Read the rest of this entry »
Internet becomes the sexy baby of China’s VC investment again, at least in 2010. Up till November, VC funds have invested a total of more than 500 million USD in China’s Internet sector. Such an investment mania is not that surprising following the success of Youku, Tudou and Alibaba. The next to follow is Clean Tech (more than 450 million) Read the rest of this entry »
VC funds have had a great year in China in 2010. Every time I talk to some friends in PE or VC industry in China, I get the feeling that there are so many liquidity in the country chasing projects. For example, a website designing cartoons without any unique edge can easily be chased after by several RMB or USD funds with millions of cheque in hand. Read the rest of this entry »
Now that it is almost at the end of the year, probably it is a good idea to do a summary of IPO market in Hongkong. According to the stats that we collect, in 2010 HK stock market has raised a total of about 410 Billion HKD. About 60% of the fund raised are in financial sector (mainly big banks from China), followed by Material and Consumer Discretionary. Read the rest of this entry »
China is the top investor in infrastructure in the world. According to a recent statistic from World Bank, China invests about 350 Billion USD in infrastructure in 2008, which accounts for about 8% of its GDP. The next biggest investor in infrastructure in terms of its GDP is India (slightly less than 8%). Read the rest of this entry »
Senators in the United States keep complaining about China’s trade surplus against US and fret about a so called under valued RMB. They reason the complaint by pointing out how many billions of dollars that China earns on the trade surplus resulting in how many thousand jobs that has cost US. Recently an article from WSJ pointed out that in fact the trade surplus from China is grossly over exaggerated. They use Iphone as an example: due to the fact that Iphone is assembled in China, 100% of the value of Iphone is recorded as a trade surplus to China. However, in fact, Chinese component (labor cost mainly) only accounts for about 3.6% of the total value of an Iphone. The bulk others are coming from Germany, Japan and South Korea. Therefore to penalize China for her trade surplus is like balking at the wrong tree from US congress.
IT is all about China when the market comes to IPO. You might not believe it or don’t like it. However, the fact is, if you look at the top ten IPOs in the past 10 years, it is all about China (almost):
|The World’s Largest IPO since 2000|
|Company||IPO Date||Fund Raised (USD Bn)||Domicile|
It is widely reported that Shanghai’s stock exchange aims to increase the trading hours to 24 hours by 2020 (click here for the story). Whether such a goal is realistic is a topic for another day. However a fact worth noting is the growing market impact of China’s stock market in the past decade. In fact, in the past 7 years, Read the rest of this entry »
China’s interest rate is all set by the central bank (People’s Bank of China). In fact, the major decisions about interest rate is set by higher authorities than the central bank. Such key rates as one year deposit and lending rate need the approval from the highest decision making body (State council and prime minister). Read the rest of this entry »
China’s trading surplus and current account surplus continues to shrink in 2010. In fact, China’s CA and trade surplus peaked in 2008, by when the current account surplus reached a high of about 11% of GDP. Since then, the CA surplus as a percentage of GDP continues to go down. Read the rest of this entry »
In the past weeks I have received a few requests from readers on the component of China’s CPI. So I present this chart here based on the source from National Bureau of Statistics in China. As you can see from the chart, Food is the single biggest contributor to China’s CPI (34%), Read the rest of this entry »
China is under the way towards an unprecedented big nation of cars. In 2010 China surpassed USA to become world’s biggest country of car sales annually. This trend is poised to continue. According to JP Morgan China will likely have about 140 million cars on the road by 2015. Read the rest of this entry »
China’s college enrollment has increased dramatically in the past 20 years. However, a recent comparison between China and USA on the college to population ratio reveals that there is still about 5% difference between the two, albeit this gap has been narrowing at Read the rest of this entry »