China Stocks Volatile; ICBC Loans Up

Mayank Mehta, Chandrasekhar Atreya and Sanjay Barot
22 Jun, 2010
New York City

Shanghai, the city targeted by China to be becoming its global financial center by 2020, is preparing to allow foreign companies to list their shares and sell bonds in the city

[R]5:00 PM Hong Kong, China – Stocks in China fluctuated but closed marginally higher and in Hong Kong closed lower. Shanghai decides to allow foreign companies to list shares and sell bonds. CCB postponed fundraising plan. ICBC increases loan balance by 8.6%. Jidong Cement raises 1.9 billion yuan.[/R]

Stocks in China gyrated and closed higher on the prospect that yuan will strengthen leading to increased consumption as imports will become cheaper. Stocks in Hong Kong fluctuated but closed lower halting its longest rally of nine days.

The CSI 300 Index gained 0.11% to close at 2,783.72. The Hang Seng Index after its 9-day rally of 7.9% dropped 0.45% or 93.10 to close at 20,819.08.

Shanghai, the city targeted by China to be becoming its global financial center by 2020, is preparing to allow foreign companies to list their shares and sell bonds in the city’s bourse, according to a statement by the local government.

The city has 49.5 trillion yuan of corporate and household savings waiting to be tapped.

China’s sovereign wealth fund along with those from South Korea and Singapore and two private equity firms have invested $900 million in Chesapeake Energy Corp, the natural gas producer from the U.S.

The investors bought the gas company’s 5.75% convertible preferred stocks on June 18, Chesapeake said yesterday in its statement without giving details. However, South Korea’s $30 billion sovereign fund said yesterday that it will spend $200 million in this purchase.

Lee & Man Paper Manufacturing Ltd, said Gold Best Holdings Ltd, its largest shareholder has decided to sell a 12% stake to Nippon Paper Group Inc for HK$3.55 billion.

Gold Best Holdings Ltd has agreed to sell to Nippon Paper 546 million shares from its holdings at HK$6.50 a share, according to a filing with the Hong Kong Stock Exchange by Lee &Man today.

Factory owners in China are facing declining profit margins after wage hike effects have been exacerbated by a rising yuan. This has prompted many companies including Nissan, Foxconn and VTech Holdings to boost their automation efforts.

Nissan’s venture with Dongfeng Motor Group Co is building a 5 billion yuan plant in Guangzhou that will be more automated, said Nissan spokesman Mitsuru Yonekawa. Both, Foxconn Technology Group, Nissan’s China venture and VTech Holdings Ltd, said they are investing in factory equipment to increase automation and reduce their reliance on labor.

Shanghai Movers

Air China Limited fell 1.4% to 11.56 yuan after the airline stocks were upgraded “underweight” by Credit Suisse Group AG.

China Vanke Co., Ltd fell 0.6% to 7.29 yuan.

China Construction Bank Corporation rose 0.4% to 4.99 yuan after the bank’s fundraising plan is to be postponed until early 2011, according to a report from 21st Century Business Herald citing Reuters.

China COSCO Holdings Company Limited the operator of dry-bulk ships fell 0.7% to 9.72 yuan.

Datang International Power Generational Co., Ltd rose 0.4% to 7.17 yuan after the company said its parent company China Datang Corp. has acquired 1.998% of the shares of Datang International since Feb 11 via Datang Overseas Investment Co., a unit of China Datang.

Industrial and Commercial Bank of China Limited fell 0.2% to 4.27 yuan after the lender said that its total loan balance in the first five months increased by 455.4 billion yuan or 8.57% from the end of 2009, reports 163.com, citing Wei Xuekun, deputy general manager of the bank’s loans department.

Poly Real Estate Group Co., Ltd rose 0.2% to 11.83 yuan.

SAIC Motor Corporation Limited closed unchanged at 12.05 yuan after the carmaker said trading in its Shanghai-listed shares will be halted June 21 pending an announcement about a share placement to be reviewed by its board within a week, according to Bloomberg report.

Tangshan Jidong Cement Company Limited increased 8.5% to 15.60 yuan after the company will raise 1.915 billion yuan through the placement of 134 million shares to Diamondrock Investment at 14.21 yuan per share, reports 163.com, citing a company filing on June 21.

[HK Movers

China Overseas Land & Investment Ltd fell 1.2% to HK$16.40.

China Resources Land Limited, the developer, fell 2.2% to HK$15.94.

Foxconn International Holdings Limited, the contract maker of mobile phones, fell 3.0% to HK$5.76.

Lee & Man Paper Manufacturing Ltd dropped 3.7% to HK$6.44 after the company said on Tuesday it has agreed to buy a 12% stake in China''s Lee & Man Paper Manufacturing Ltd. for about 42.6 billion yuan to strengthen its business in the fast-growing Chinese market, according to Dow Jones report.