China FDI Surges; Three IPOs

Darlington Musarurwa
16 Dec, 2009
New York City

China plans to cap thermal power price hikes. Three initial public offerings were priced on different exchanges in China. China Shipbuilding gained 12% but Henan Huaying surged 80% and Hainan Strait Shipping soared 45%. Foreign direct investment in China increased 32% in November to $7 billion, but fell 10% in the year.

[R]6:00 AM New York, 6:00 PM Hong Kong - China plans to cap thermal power price hikes. Three initial public offerings were priced on different exchanges in China. China Shipbuilding gained 12% but Henan Huaying surged 80% and Hainan Strait Shipping soared 45%. Foreign direct investment in China increased 32% in November to $7 billion, but fell 10% in the year.[/R]

China and Hong Kong stocks dropped on lingering worries Beijing will move in to rein in rising property prices. Three initial public offerings were priced otoday.

In Hong Kong trading Hang Seng Index fell 0.9% or 202.18 to 21,611.74, and the China Enterprises Index of Hong Kong listed mainland shares, or H shares, fell 1.4% or 175.56 to 12,691.43. In Shanghai trading, the CSI 300 Index decreased 0.6% or 22.62 to 3,560.72.

Daily turnover on main-board fell to HK$62.51 billion from HK$68.45 billion yesterday.

China Shipbuilding Industry Co. increased 12% in its first day of trading in Shanghai. Henan Huaying Agriculture Development Co soared 80% and Hainan Strait Shipping increased 44% on the first day of trading in Shenzhen Stock Exchange.

China to Cap Thermal Power Price Hikes

Global Times said that the National Development and Reform Commission said in a report dated Monday Beijing will revise the percentage that coal-fired power plants are required to absorb in the change in coal costs while setting a ceiling on thermal power price increases.

Government will adjust prices if coal prices change 5% every six months, while power companies are expected to absorb 30% change in coal costs and pass on 70% to consumers.

The NDRC hopes it will improve the coal-power linkage in the interim before it introduces competitive power pricing.

In addition, the commission added coal prices will continue to be determined by the market and urged suppliers and users to complete supply contracts within a month.

Negotiations last year ended in a deadlock.

Negotiations at last year''s pricing conference, attended by coal industry members from all over the country, ended in a stalemate, as coal suppliers and buyers with sharply contradictory expectations on term prices and refused to compromise.

Next year’s term prices are forecasted to rise in 2010 as power generation and spot thermal coal prices have been gaining since September.

Alibaba.com, CCB in Rmb5.6 million Loan for SMEs

Separately, the online edition said Alibaba.com and China Construction Bank will partner to offer loans of Rmb5.6 million for small and medium enterprises in Guadong Province.

The loans don’t require any collateral and companies must have Rmb 500,000 in registered capital to qualify.

Gainers & Losers

Financial stocks fell on speculation China will tweak with lending regulations in order to contain soaring property prices.

China Construction Bank fell 2.1% to HK$6.56, Bank of China plunged 1.4% to HK$4.10 and ICBC slipped 1.3% to HK$6.30.

Realty stocks also fell in Hong Kong. China Overseas Land dropped 1.7% to HK$16.96 and Shimao Property decreased 4% to HK$15.10.

Silver Base Group slipped 13.9% to HK$2.69 on reports the company’s chairman will place 100 million existing shares with third-party investors for HK$275 million to expand the company’s shareholder base.

Tingyi Holdings decreased 5.2% to HK$19.30 after the company’s depositary receipts gained 7% on the first trading day.

China Shipbuilding Industry rose 12.5% to Rmb 8.30 on its Shanghai trading debut. The initial public offering was priced at Rmb7.38. The ship builder raised Rmb14.7 billion or $2.2 billion in the offering and was valued at 41 times its annual 2008 earnings.

The company plans to use about one third of the offering to expand engine and other assemblies as China requires local components of as much as 80% for all ship built by 2015.

Steel stocks fell. Baoshan Iron and Steel dropped 2.3% to Rmb8.84.

Coal stocks were mixed. Yanzhou Coal jumped 0.5% to Rmb24.20 and Datong Coal decreased 0.7% to Rmb48.83.