China Refutes Foreign Debt Stance

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

China refuted media speculation that it is looking to shift away from the exposure to euro-zone debt. The statement from the People

[R]5:30 PM Hong Kong, China – China stepped up its efforts to deny latest media speculation that it may lower its holdings of euro-zone debt. The strong denial from the central bank lifted market indexes in China region and in Asia. Separately, China was forced to offer higher interest rate at its short-term debt auction.[/R]

China refuted media speculation that it is looking to shift away from the exposure to euro-zone debt. The statement from the People’s Bank of China noted that media speculation, without naming the source is “groundless.” The strong denial lifted stocks in China region and in Asia.

On Wednesday, Financial Times speculated that China is looking to curtail its exposure to euro-zone debt on the rising worries of debt restructuring in the region.

People’s Bank of China noted in a statement that Europe remains a key market for investing the nation''s exchange reserves.

The euro-zone debt crisis will not seriously affect China''s overseas investment, the general manager of China Investment Corporation said yesterday.

""The CIC will keep its investment level in Europe, no more, no less,"" Gao Xiqing said at the 2010 Organization for Economic Cooperation and Development Forum in Paris.

The CIC is very concerned about the short-term market fluctuations amid threatened euro-zone stability, he said. Gao added that, in the long run, the CIC will keep a close eye on the EU policies, currency reforms and issues of financial regulation.

Stocks in China pared losses and gained led by insurers and commodity producers. The Shanghai Composite Index changed very little after reversing an earlier decline of 1.6%.

However property stocks dropped for the third day for its longest stretch of drop after the nation’s taxation agency said it will tighten collection of an existing value-added tax on land in China.

Hong Kong stocks gained led by shipping lines and oil producers, after Morgan Stanley recommended buying Chinese shares.

Hang Seng index in Hong Kong increased 234.92 or 1.22% to 19,431.37 and CSI 300 index in China closed higher 46.04 or 1.64% to 2,859.98. The Hang Seng China Enterprises Index tracking the H-shares of Chinese companies rose 1.1% to 11,132.75.

The People’s Bank of China increased interest rates on three-month bills by four basis points to 1.4896 from a week ago to attract investors from higher yielding longer maturity debts.

In the second straight auction PBOC sold 5 billion yuan today compared to 6 billion a week ago. The PBOC sold 30 billion yuan of one-year bills earlier this week at 1.9264%, a rate that remains unchanged since January 19.

The central bank injected a net of 145 billion yuan into the inter-bank market in open market operations in this week as compared to net withdrawals of 51 billion yuan last week.

Refiners in China are building additional oil-refining capacity after the state introduced a fuel-pricing system that ensures a profit. The country may see a fuel surplus this year as it adds 31.5 million tons of capacity, China National Petroleum Corp, PetroChina’s parent, said on February 4.

‘The supply may increase to 80 million tons by 2015’, said Fu Bin, Deputy General Manager of PetroChina’s sales unit at an industry conference in Beijing today.

Honda Motor Co, halted production at two of its plants in Guangzhou, Guangdong province on May 24 and two other factories in Guangzhou and Wuhan Hubei province on May 26, said Tomoko Uchida, a spokeswoman of the company by phone today.

Production at these four factories were halted after workers at a parts factory in Foshan, Guangdong province went on strike on May 17 demanding a pay rise. The 1850 workers at the parts plant are demanding monthly pay hike of 2000 yuan to 2500 yuan, Honda’s Matsuura said.

Shanghai Movers

Bank of Beijing Co., Ltd rose 0.5% to 13.56 yuan after the lender Thursday said its shareholders have approved its plan to sell 30 billion yuan ($4.39 billion) of bonds to help boost its capital buffer and fund new business, according to reports. The bank is 16% held by ING Group N.V.

China Vanke Co., Ltd, the listed property developer, added 1.2% to 7.53 yuan.

China Life Insurance Company Limited advanced 2.0% to 24.63 yuan.

China South Locomotive & Rolling Stock Corporation Limited rose 1.4% to 5.03 yuan after the maker of rail vehicles signed strategic cooperative agreement with hunan province and National Development Bank.

Chongqing Three Gorges Water Conservancy and Electric Power Co., Ltd rose 1.6% to 8.55 yuan after the company announced that it will issue up to 60 million common shares through a private placement.

Hainan Airlines Co., Ltd rose 2.0% to 5.90 yuan after the carrier said it signed an agreement with Beijing’s government to build an international “aviation city” in the eastern part of the Chinese capital, housing headquarters of airlines and other related industries.

Ping An Insurance (Group) Company of China, Ltd rose 1.5% to 46.10 yuan after the Ping An Property & Casualty Insurance, a subsidiary of the company said it completed the issue of 2.5 billion yuan worth of 10-year callable subordinated bonds, reports 163.com, citing an announcement by Ping An Property & Casualty Insurance.

HK Movers

China Overseas Land & Investment Limited rose 3.6% to HK$15.48.

China Solar Energy Holdings Limited surged 23.8% to HK$0.21 after the company announcing a plan to sell new shares to raise money.

Kingdee International Software Group Company Limited surged 14.8% to HK$2.55.