China Stocks Rebound, Weekly Drop of 4%

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

Finance Ministry in China completed the sale of 28 billion yuan bonds maturing in 2060 at an average of 4.03%. For the week indexes in Shanghai declined 4.2%. PetroChina Company Ltd halts CNPC assets purchase plan. Huadian Power plans to acquire power plant for 900 million yuan.

[R]7:00 PM Hong Kong, China – Finance Ministry in China completed the sale of 28 billion yuan bonds maturing in 2060 at an average of 4.03%. For the week indexes in Shanghai declined 4.2%. PetroChina Company Ltd halts CNPC assets purchase plan. Huadian Power plans to acquire power plant for 900 million yuan.[/R]

Chinese stocks pared some of the recent losses as investors expect the government to hold off floating the yuan as slower US recovery and debt crisis in Europe threatens economic growth.

The Finance Ministry sold 28 billion yuan of bonds maturing in 2060 at an average yield of 4.03%, according to traders at China Postal Savings Bank and Agricultural Bank of China. This second sale of 50-year bond was competed at a lower yield since insurance companies were found to favor government bonds offering higher returns as stocks took a beating.

Reduced demand for shorter duration paper has caused the failure of one-year bonds on April 28 and two treasury-bill auctions on April 9.

Seeking stability in Xinjiang, the nation’s second biggest oil producing region, President Hu Jintao has sought to double the investment in the region so that per capita gross domestic product for the region can be brought to the national average by 2015. The thinly populated region was rocked by ethnic violence last year.

The official Xinhua news agency reported after a three-day meeting on the plan.

China National Petroleum Corp also plans to expand by 50% its refining operations in Xinjiang to help the region to develop faster. CNPC hopes to boost its crude processing capacity to 30 million tons a year, said the company’s President Jiang Jiemin during a meeting with the central government this week as cited on its website today.

As a long-term strategic investment, The National Council for Social Security Fund has invested more than 15 billion yuan in Agricultural Bank of China to become its third largest stakeholder.

The Agricultural Bank was scheduled to raise through an IPO 70 billion yuan in Shanghai and HK$120 billion in Hong Kong, as reported by the Economic Observer on May 10. A combined IPO of that size would make it the world’s biggest offering.

Organizers of the $44 billion World Expo in Shanghai have taken steps to attract more visitors by measures aimed at cutting long queues and have reduced food prices as the attendance has fallen well below forecasts.

US Secretary of State Hillary Clinton is scheduled to visit the expo tomorrow. French President Nicolas Sarkozy and European Commission President Jose Manuel visited the site for the opening ceremony.

China will restrict foreign investment in the nation’s insurance companies to financial institutions, the China Insurance Regulatory Commission said on its website. Foreign investors will need to have $2 billion of assets and be profitable for the three preceding years, to be eligible.

The CSI 300 index in China closed higher 42.77 or 1.57% to 2,768.79 and dropped as much as 2.9%. For the week the index declined 4.2%.

Shanghai Movers

China Life Insurance Company Limited rose 0.08% to 24.02 yuan.

GD Power Development Co., Ltd dropped 2.7% to 3.60 yuan after China Guodian Corporation, the parent company exercised 25.97 million CWB1 warrants of the company at a price of 3.7 yuan on May 20, reports China Securities Journal, citing a company filing.

Guodian Nanjing Automation Co., LTD, the maker of circuit and transformer protective devices, rose 4.3% to 21.35 yuan.

Huadian Power International Corporation Limited closed unchanged at $4.17 yuan after the electricity producer plans to invest 900 million yuan to purchase a 100% stake in Pingshi Power Plant from Haiyue Power Investment and Jinda Power, reports 163.com, citing a company filing.


PetroChina Company Limited fell 0.2% to 10.84 yuan after the oil producer halted plans to buy out its parent in an overseas exploration and development venture due to income tax and oil price concerns.

HK Movers

Bank of China Limited closed unchanged at HK$3.94.

China Construction Bank Corporation fell 0.3% to HK$6.15.