China Stocks Rebound Near Bear Levels

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
13 May, 2010
New York City

Stocks in Shanghai and Hong Kong gained as investors returned. Domestic earnings, calmer European markets and positive economic data in the U.S. encouraged investors. PetroChina plans to issue 40 billion yuan bonds. Tencent revenues grow 69% in first quarter. Gemdale said April sales rise 22%.

[R]6:00 PM Hong Kong, China – Stocks in Shanghai and Hong Kong gained as investors returned. Domestic earnings, calmer European markets and positive economic data in the U.S. encouraged investors. PetroChina plans to issue 40 billion yuan bonds. Tencent revenues grow 69% in first quarter. Gemdale said April transaction value surged 22%.[/R]

Stocks in China climbed the most in almost three weeks on concern that recent bear market declines may have been excessive given the earnings outlook and the easing of the euro concerns.

Today’s gains pared losses since the peak in November for the Shanghai Composite Index to 19.6%, below the 20% threshold for a bear market.

The CSI Small Cap 500 Index fell more than 20%, to as low as 3979.13 yesterday from the peak of 4,977.51 on April 14, indicating the small cap stocks are in a bear market.

The failure to strengthen the index beyond the highs of April this year and November 2007 are signals to further possible declines.

Yuan forwards strengthened today, extending the rebound from an eight month low on expectations that China may relax its peg to the dollar before the upcoming US- China Strategic and Economic Dialog scheduled to be held in Beijing on May 24-25.

Any adjustment to the yuan exchange rate must be slow and unpredictable to prevent any damage to the economy, according to comment in the official China Daily newspaper today. US Treasury Secretary Timothy F. Geithner is expected to attend the conference.

Rainbow Department Store Co, a department store operator from Shenzhen got an IPO approval from the China Securities Regulatory Commission recently to raise about 1.06 billion yuan in Shenzhen on May 5, according to a statement filed by the company on May 11.

PetroChina Co, the country’s biggest oil producer will offer 20 billion yuan of fixed-rate five-year bonds and 20 billion yuan of variable-rate seven-year notes to raise 40 billion yuan for working capital needs, according to the company’s filing on the ChinaBond website.

The company said in the filing on the Web site that it had an operating capital shortfall of 61.8 billion yuan at the end of March. The total outstanding debts were 119.5 billion yuan including 3.5 billion yuan of company debt besides medium term notes and short-term financing bonds.

China Mobile Ltd and China Unicom (Hong Kong) Ltd, the country’s two biggest wireless carriers are looking at iPad to help add higher spending subscribers by offering devices that offer faster internet browsing and multimedia application wirelessly to lift revenue affected by cost cutting measures for voice calls.

Lu Yimin, the President of China Unicom said the company is exploring the introduction of iPad as it is the only carrier that offers high speed wireless network compatible with iPhone of Apple Inc.

China Mobiles Chairman Wang Jianzhou said he hoped Apple would develop iPhone and iPad versions that support their technology.

Hang Seng index in Hong Kong increased 209.97 or 1.04% to 20,422.46 and CSI 300 index in China higher 68.75 or 2.44% to 2,886.91.

Shanghai Movers

Bank of Communications Co., Ltd increased 3.4% to 7.00 yuan and China Construction Bank Corporation rose 0.5% to 5.18 yuan.

China United Network Communications Limited rose 2.5% to 5.54 yuan.

Gemdale Corporation fell 0.1% to 6.21 yuan after the company said that transaction area in April rose 3.1% year-on-year to 152,400 square meters, according to China Securities Journal, citing a company filing.

Industrial and Commercial Bank of China Limited rose 0.6% to 4.59 yuan after the China''s cabinet approved proposals by the nation''s four listed banks to raise 287 billion yuan or $42 billion from the securities markets, the National Business Daily reported.

HK Movers

Air China Limited gained 8.1% to HK$7.72 after the airline was upgraded to “overweight” from “equal-weight” by Morgan Stanley

Bank of China Limited added 1.2% to HK$3.99.

Hutchison Telecommunications International Limited advanced 1.3% to HK$2.19 after the company’s shareholders backed the HK$4.23 billion ($544 million) buyout offer from parent Hutchison Whampoa Ltd., clearing the way for billionaire Li Ka-shing to reorganize his phone operations.

Parkson Retail Group Limited fell 1.6% to HK$11.64 after the department stores in mainland China, was downgraded to “equal-weight” from “overweight” by Morgan Stanley.

Tencent Holdings Limited climbed 3.6% to HK$156.80 after the Internet commerce enabler reported first quarter revenue grew 68.7% to 4.22 billion yuan from 2.50 billion yuan a year ago.