Singapore’s GDP Unexpectedly Shrinks on Weaker Output
Jan. 2 (Bloomberg) -- Singapore’s economy unexpectedly contracted for the first time in 4 1/2 years as factory output slowed, suggesting Asia’s export-dependent markets may face increased risks from weaker global growth.
Gross domestic product shrank an annualized 3.2 percent last quarter after adjusting for inflation, from a revised 4.4 percent expansion in the previous three-month period, the trade ministry said today. Economists had expected a 3.1 percent gain.
Singapore is first in Asia this year to report fourth- quarter figures, giving analysts an insight into how turmoil in global markets and the subprime-mortgage crisis in the U.S., the region’s biggest export destination, may affect Asian economic expansion. South Korea and Taiwan have already warned easing demand for semiconductors, mobile phones and computers portends weaker growth in 2008.
‘‘We definitely should expect to see more softness in exports in the next couple of quarters, and that’s bad news for electronics-heavy Asian economies,’’ said Kit Wei Zheng, an economist at Citigroup Inc. in Singapore. ‘‘That means slower growth for Singapore and the rest of Asia.’’
The Singapore dollar rose 0.1 percent to S$1.4391 per U.S. dollar by 7:59 p.m. in Singapore. The benchmark Straits Times Index fell 0.6 percent to 3,461.22.
Asia is twice as reliant on exports as the rest of the world, with 60 percent of overseas sales ultimately destined for the U.S., Europe and Japan. China and South Korea are due to report fourth-quarter GDP numbers later this month, while Japan and Taiwan are scheduled to release theirs in February.
Factory Output
Singapore’s manufacturing climbed 0.5 percent in the last three months of 2007 from a year earlier, the smallest increase in 18 quarters. Output growth slowed from a revised 10.3 percent in the July-September period as pharmaceutical plants produced fewer drugs, the trade ministry said.
The Asian Development Bank last month said growth in emerging East Asia in 2008 will be 8 percent, half a percentage point lower than last year.
Singapore’s $132 billion economy grew 6 percent in the fourth quarter from a year earlier after gaining a revised 9 percent in the previous three months. Economists expected 7.7 percent growth.
‘‘There’s no imminent turnaround in electronics and we’re unlikely to see a recovery in the next six months,’’ said Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore. ‘‘Pharmaceuticals, a key support for manufacturing, have been losing steam.’’
Electronics Slump
Singapore’s electronic exports have dropped each month since February, mired in the worst slump in five years. South Korea yesterday lowered its growth forecast for 2008, pointing to the likelihood of slowing exports. Taiwan is also predicting an easing in overseas shipments this year which it said will make its growth target ‘‘highly challenging.’’
Hynix Semiconductor Inc. Chief Executive Officer Kim Jong Kap last week told employees of the world’s second-largest maker of memory chips, based in Ichon, South Korea, that ‘‘a difficult period’’ is foreseen for the first quarter or the first half.
South Korea’s exports rose a less-than-expected 15.5 percent in December from a year earlier, the Commerce Ministry reported today. Overseas shipments are forecast to increase 11.6 percent in 2008, the ministry said. Singapore’s services industry climbed 8.3 percent, matching the growth rate in the previous three-month period.
Stocks Tumble
Economists said demand for financial services probably eased as the rout in global credit markets increased risk aversion and the city-state’s government implemented measures to cool the property market.
Global stock markets have lost $1.6 trillion in value since October and the collapse of the subprime-mortgage market in the U.S. triggered more than $80 billion in writedowns among the world’s largest banks.
‘‘Singapore’s financial services industry has been affected by the shadow of the subprime problem,’’ Seah said. ‘‘Investors are more cautious and that has slowed down activity.’’
The island’s burgeoning construction industry prevented a wider contraction in the economy last quarter as companies such as Exxon Mobil Corp. set up new plants and property developers build new office towers and condominiums. Southeast Asia’s fourth-largest economy reported a record S$16 billion ($11 billion) in fixed-asset investments last year.
Construction surged 24.4 percent from a year earlier, after a revised 19.2 percent gain in the three months ended September.
The economy advanced 7.5 percent in 2007, easing from a 7.9 percent rate of expansion the year before. The government expects growth to be between 4.5 percent and 6.5 percent in 2008.
Singapore’s growth had raised concern the economy is overheating, with consumer prices rising at the fastest pace in more than 25 years. Policy makers expect inflation to be between 3.5 percent and 4.5 percent this year, accelerating from a forecast average of 2 percent in 2007.
The figures today are computed from data for October and November. Revised numbers, including nominal gross domestic product, will be released next month.
Shanghai May Restrict Home Purchases, Shanghai Daily Reports
Jan. 2 (Bloomberg) -- Shanghai may introduce new policies to restrict people without local permanent residence permits from buying homes in the city, seeking to curb property speculation, the Shanghai Daily reported, without saying where it got the information.
The initiative, announced last week by the municipal government, will make it harder for speculators from other parts of the country to buy residential properties in Shanghai in the future if they don't have legal-residence permits, the newspaper said, citing Xue Jiangxiong, head of research at Shanghai Youwin Real Estate Information Service Co.
The Shanghai Housing and Land Resources Administration Bureau will work jointly with local development and reform and public security departments to draft such policies, the report said. No timetable was released, it said.
Kosmo! reported that a massage parlour in Kuala Lumpur is offering the services of gay masseurs.
What is so special about the massage is that the masseurs would perform the task naked.
The daily's reporter, who went undercover as a customer, found these masseurs earned up to RM3,000 a month or RM150 on a good day minus their commissions.
Some customers would ask for "extra services" which cost between RM100 and RM150.
"This job is relaxing and it pays well," said one of the masseurs.
The gay masseurs included locals as well as foreign workers from Myanmar, Pakistan, Thailand and the Philippines.
0047 GMT [Dow Jones] STOCK CALL: OCBC Investment Research starts China Oilfield Technology Services (DT2.SG) at Buy with S$1.01 fair value, based on 22X FY08 earnings. Says oil recovery specialist poised to benefit as production at China’s aging oilfields "showing alarming signs of peaking" while oil demand remains strong. Notes company has proven its prowess in tertiary oil arena with its market leadership in tertiary oil recovery equipment in China’s flagship Daqing oilfields, which contributed nearly 25% of country’s total annual oil production in 2006. Adds phase 1 of firm’s new production complex set to increase FY06 capacity by at least 5X; "COT has the ability to accelerate its growth and also diversify in terms of geography and business." Stock closed down 0.6% at S$0.81 yesterday. (FKH)
Fed Officials Lowered Growth Outlook at Last Meeting
Jan. 2 (Bloomberg) -- Federal Reserve officials said economic growth in 2008 will fall short of their own forecasts, reflecting weaker consumer spending and a deeper housing slump.
Policy makers “agreed on the need to remain exceptionally alert to economic and financial developments and their effects on the outlook,” the Federal Open Market Committee said in minutes of the Dec. 11 session, released today in Washington. “Members would be prepared to adjust the stance of monetary policy if prospects for economic growth or inflation were to worsen.”
Fed officials anticipated growth that was “somewhat more sluggish” than they projected in October, while refraining from signalling a bias to lower rates further, citing “heightened uncertainty.” By contrast, traders predict December’s quarter point cut in the benchmark interest rate will be followed by reductions at the next two meetings to stave off recession.
“The tone of the Fed minutes suggests more cuts to come,” said Alan Skrainka, chief market strategist in Des Peres, Missouri, at Edward Jones & Co., which oversees $485 billion. The economy isn’t performing as “they thought it would, and conditions in the credit and housing markets continue to erode since the last meeting.”
Some FOMC members said the chance of further tightening of lending standards may restrain economic expansion and “require a substantial further easing of policy.” At the same time, officials judged that a rapid improvement in financial conditions would mean “a reversal of some of the rate cuts might become appropriate,” the minutes showed.
Treasury Rally
Treasury notes stayed higher after the report. The yield on the benchmark 10-year note fell to 3.91 percent at 4:13 p.m. in New York, from 4.03 percent late Dec. 31.
The Fed also said that one official opposed last month’s agreement to provide dollars to European central banks to help meet banks’ funding needs. St. Louis Fed President William Poole dissented, saying the deal was “unnecessary” because of the size of the European Central Bank’s and Swiss National Bank’s dollar reserves.
Poole wasn’t immediately available to respond to questions, spokesman Joe Elstner said.
The Dec. 11 quarter-point cut disappointed investors seeking a larger move and caused the biggest stock sell-off after a Fed decision since Chairman Ben S. Bernanke, 54, took office in 2006. Bernanke, approaching the midpoint of his four- year term, has sought to separate the Fed’s strategies of extending the six-year economic expansion and alleviating financial strains.
‘Somewhat Restrictive’
Policy makers at the meeting judged monetary policy to be “somewhat restrictive,” with growth risks increasing, the minutes said. The report contains no mention of debate over the size of the rate reduction other than a mention of Boston Fed President Eric Rosengren’s dissent in favour of a half-point move.
Traders increased bets today the Fed will lower the target rate for overnight loans between banks by a half-point to 3.75 percent on Jan. 30. The likelihood rose to 26 percent, from zero yesterday, based on contracts quoted on the Chicago Board of Trade. Futures show a 74 percent chance of a quarter-point move.
Investors anticipate that policy makers will lower borrowing costs further to help sustain the six-year economic expansion. The Institute of Supply Management today reported that its gauge of U.S. manufacturing slumped to the weakest in almost five years.
Squeeze Eased
Signs of distress in bank funding and credit markets have diminished since the Fed acted in concert with counterparts in Europe to inject funds into money markets. The Fed, ECB, Swiss National Bank, Bank of England and Bank of Canada announced the initiative a day after the FOMC meeting.
The premium of three-month dollar loans between banks over U.S. Treasury bills maturing in the same period fell today to the lowest in almost two months. The so-called ted spread has fallen as the three-month London Interbank Offered Rate for the dollar dropped to 4.68 percent from 5.13 percent Dec. 10.
The U.S. central bank last month introduced a new tool, the Term Auction Facility, to provide funds to banks beyond the one- day maturity in the federal funds market. The Fed held two auctions totalling $40 billion and plans two this month, with continued sales “for as long as necessary,” the Fed said Dec. 21.
Fed officials also announced Dec. 12 a $24 billion swap-line with the ECB and Swiss National Bank to help meet demand for dollars among banks in Europe.
Conference Call
Today’s minutes disclosed that the FOMC and Board of Governors discussed the auctions and swaps in a Dec. 6 conference call. The Board of Governors approved the auction facility in a Dec. 10 notation vote, the minutes showed.
“A few” officials “questioned the need for and the likely efficacy of the proposal, expressed concerns about the longer-run incentive effects of a TAF, and felt that the possible drawbacks could well outweigh any benefits,” minutes of the Dec. 6 call said.
The U.S. economy, the world’s largest, grew at a 1 percent pace in the fourth quarter after expanding at a 4.9 percent rate the previous three months, according to the median estimate of economists surveyed by Bloomberg News last month. Growth for all 2008 is projected at 2.3 percent.
The Fed’s statement last month said that “some inflation risks remain.”
Inflation Rate
Inflation, measured by the Commerce Department’s personal consumption expenditures price index minus food and energy, was 2.2 percent in November, the highest since March. Fed officials in October forecast the “core” gauge will rise 1.6 percent to 1.9 percent in 2010, an indication of their preferred longer-term range.
While Fed policy makers expected core inflation to “trend down a bit over the next few years,” officials were still “concerned about upside risks to inflation stemming from elevated prices of energy and non-energy commodities; some also cited the weaker dollar.”
Housing figures show the industry has yet to indicate a bottom to the slump, now in its third year. In November, sales of new homes fell more than economists forecast to a 12-year low, while sales of previously owned homes unexpectedly rose only as prices declined, reports showed the past week.
“Participants agreed that the housing correction was likely to be both deeper and more prolonged than they had anticipated in October,” the minutes said.
Rosengren Dissent
Rosengren, in his first dissent, saw “heightened risk of continued economic weakness” from housing, consumer spending and financial markets, the minutes said.
Investors may get more detail on the Fed’s direction in remarks from Vice Chairman Donald Kohn tomorrow at a conference in New Orleans. In November, Kohn reinforced forecasts for a December rate cut by highlighting concern about “deterioration” in financial markets.
Also, the Labour Department on Jan. 4 will release its monthly employment report, among the most closely watched releases for Fed officials and economists.
'Stock' beats 'sex' in Google China keyword searches
BEIJING - THE names of three banks and the word 'stocks' beat 'sex' to become four of the most Googled words in China last year, according to a Google China list seen on Thursday.
China Merchants Bank, Industrial and Commercial Bank of China and China Construction Bank ranked second, third and sixth, according to a list supplied by Google China on its website www.google.cn.
'On the Chinese mainland, it was money and technology that took the honours last year,' the China Daily said, pointing out that 'sex' was the most popular keyword for Google users in some other countries.
Fourth on the list was 'stock', not surprising with Shanghai shares having risen 97 per cent last year. At number 1 was 'QQ', a Chinese instant message service and a brand of car.
China's Central Bank, the Ministry of Finance and Banking Regulatory Commission ranked first, third and fifth in the 'Most Popular Departments' list, the Web site said.
In another list named 'qiu zhi', or 'seeking knowledge', 'what is a blue chip' and 'how to invest in the stock market' were the most searched questions on Google in China, while 'what is love' and 'how to kiss' ranked top of the global list.
China keeps a tight rein on Internet content and has launched several campaigns to root out online pornography, perhaps one reason why 'sex' did not score so well. -- REUTERS
Air China Parent: Still Hoping CEA-SIA Deal Will Be Amended
HONG KONG (Dow Jones)--China National Aviation Holding Co. said Thursday it hasn't received any proposal from China Eastern Airlines Corp. (CEA) that would change its view against the Shanghai-based carrier's proposed stake sale to Singapore Airlines Ltd. and Temasek Holdings Pte.
The state-owned parent of Air China Ltd. (0753.HK), which holds 12.07% of the Hong Kong-listed shares of China Eastern, said it is still hoping that the stake sale deal can be amended.
"We cannot accept an unamended deal," CNAHC said.
The company said if China Eastern's shareholders vote down the tie-up with Singapore Airlines in a meeting Tuesday, it will table its own proposal to acquire China Eastern's shares.
CNAHC said in a statement Tuesday it believes the HK$3.80 per-share price offered by Singapore Airlines and Temasek for a combined 24% stake in the airline doesn't reflect China Eastern's fair value.
CNAHC said the anti-dilution rights and a non-competition clause granted by China Eastern to the Singapore companies "fail to treat other shareholders of China Eastern equally."
CNAHC has requested China Eastern to conduct further discussions with Singapore Airlines and Temasek, and amend relevant clauses to make a "practical plan acceptable to us."
A person familiar with the situation said earlier Thursday CNAHC is planning a counterbid for a stake in China Eastern for around HK$5 a share.
The planned counterbid is aimed at pre-empting the proposed CEA-Singapore Airlines tie-up.
However, the person also said a decision on a counterbid hasn't yet been finalized.
Although the stock market rally in the past year seems to have lost much of its steam, analysts remain confident of the upward trend, albeit at a much more moderate curve.
Any notion of a possible meltdown has been largely discarded as the market still basks in ample liquidity. The rumblings of the US subprime mortgage crisis sound nothing more than a vague and distant threat.
So far, government credit tightening measures, including interest rate increases, have made only short-lived impacts on investor sentiment because of the lack of leveraged trading. What’s more, the huge supply of new scrips in various mega IPOs were absorbed without causing any durable liquidity strain.
What’s helped cool down the stock market fever a little is growing investor concern about overvaluation and a possible slowdown in corporate earnings growth. But with so much liquidity swishing around the system, none of these factors could squeeze out the market bull.
“The excess liquidity in the Chinese economy is unlikely to disappear anytime soon,” said Shen Minggao, an economist at Citigroup.
Shen added that the rising trade surplus and current surplus had led to speculation on currency appreciation. Capital inflows through direct investment and current account activities have also surged.
In addition, recent re-pricing of risk amid the subprime crisis in developed markets and expected Fed cuts would mean more capital inflows to emerging market economies.
“We expect in the near term a range-trading or even market correction in the coming months,” said Jerry Lou, an economist at Morgan Stanley. But as the ample liquidity still remains, “we are likely to stay bullish for most of 2008”.
The government has also announced some measures to encourage capital outflows, including the qualified domestic institutional investor system and the “through train” for individuals to invest in the Hong Kong stock market.
Shen said a liquidity crunch is unlikely in the near term given foreign investors’ increasing interest in renminbi assets, but a reversal of liquidity flows is still likely as long as the global market remains volatile.
Corporate earnings growth is expected to slow with the weak stock market performance because at least one-third of the earnings growth was a result of the booming market from revaluations of investment portfolios and capital gains, experts said.
“Headline earnings growth could easily disappoint due to the role of stock market gains in the profit numbers this year,” said Jonanthan Anderson, senior economist at UBS Investment Research.
But analysts said a massive market sell-off or meltdown is unlikely.
“The stock market collapse is not expected to happen because there is no margin trading system in China,” said Cao Honghui, a researcher with the Chinese Academy of Social Sciences. Unlike the US consumer, who borrows about 60 percent of what he or she spends, Chinese consumers are borrowing less than 5 percent.
“We could view a market correction as canceling some positive effects from the recent rally. Given the authorities’ priorities to maintain social and economic stability, the scenario of a sharp market correction doesn’t look likely in the short term,” said Shen.
Experts said stocks in the consumer sector, such as consumer products, retail and telecom, are worth investing this year as their earnings are based on much safer and strong volume growth.
Asset-price-sensitive sectors, including banks, insurance, real estate, oil and material are more dangerous to invest in because of their exposure to tightening risks and US recession.
“Medical consumption companies and electrical appliance companies are expected to perform well because the government is expected to invest significantly in the social security and healthcare systems,” said Gui Haoming, chief analyst at Shanghai Shenyin Wanguo Securities.
“Following slower year-on-year credit growth, financial institutions should also see slower profit growth in the fourth quarter as the government calls for credit tightening,” said Shen.
Shen added that share prices of listed banks could be under pressure, and non-performing loans at some banks could build up if firms suffer from financial distress in the near future. Those who rely more on interest income may suffer the most.
SINGAPORE (Dow Jones)--China National Aviation Holding Co. is planning a counteroffer for a stake in China Eastern Airlines Corp. (CEA) at around HK$5 a share, but Singapore Airlines Ltd. (C6L.SG) won't be lured into a bidding war, people familiar with the situation said Thursday.
The move by the parent of Air China Ltd. (0753.HK) would aim to pre-empt the deal that the Shanghai-based carrier has with Singapore Airlines and its parent Temasek Holdings Pte., in which the Singaporean companies will acquire a combined 24% stake in China Eastern at HK$3.80 a share.
Shareholders of China Eastern are scheduled to vote Tuesday to ratify the Singapore Air tie-up.
CNAHC said Thursday if China Eastern's shareholders vote down the tie-up with Singapore Airlines, it will table its own proposal to acquire the China Eastern shares.
"The developments are still changing right now...(CNAHC and China Eastern) could even broker a deal in the next few days and the counteroffer may be called off," said a person familiar with the situation.
He said, however, that it is "quite clear" CNAHC will vote against the deal at Tuesday's meeting. The state-owned company owns 12.07% of China Eastern's Hong Kong-listed shares.
Regardless of what happens in China, Singapore Airlines and Temasek have no plans to match or top any counterbid.
"If the vote goes against the deal there is not a plan B which would see an immediate lifting of the price," a person familiar with the deal in Singapore said.
SIA Chief Executive Chew Choon Seng told reporters in Beijing last month that its HK$3.80-a-share offer was the ceiling, and that it was up to the shareholders of China Eastern to decide.
"Nothing has changed from that position," another person said.
In a statement Thursday, CNAHC said it hasn't received any proposal from China Eastern that would change its stance against the proposed stake sale to the Singaporean companies. CNAHC had said Tuesday it believes the price offered by Singapore Airlines and Temasek doesn't reflect CEA's fair value.
"We cannot accept an unamended deal," CNAHC said.
CNAHC said it has requested China Eastern to conduct further discussions with Singapore Airlines and Temasek, and amend relevant clauses to make a "practical plan acceptable to us."
The deal requires the approval of two-thirds of China Eastern's minority holders of both A and H shares.
At the moment, China Eastern's parent, China Eastern Air Holding Co., owns 59.67% of China Eastern. A further 8.14% of the company is publicly traded in Shanghai via A shares, while 32.19% of the company is publicly traded in Hong Kong via H shares.
China Eastern Air Parent Says Bid Reasonable
China Eastern Air Holding Co. said Thursday it believes the price offered by Singapore Airlines and Temasek is reasonable.
It said that the comments made by CNAHC lack "independence and objectivity," as CNAHC is both a shareholder of China Eastern and a major competitor.
The SIA-Temasek offer, which is backed by both the China Eastern board and the Chinese government, was also endorsed by Institutional Shareholders Services Inc.
"(Given) the lack of an alternative offer for fresh capital, and the expected benefits arising from a strategic partnership with a world-class airline operator with an extensive international network and expertise, as well as a world renowned brand name, we recommend shareholders vote in favor of these resolutions," an ISS note to institutional shareholders dated Dec. 21, seen by Dow Jones Newswires, said.
ISS is a proxy-research firm headquartered in Rockville, Maryland, which makes recommendations to more than 2,000 institutional investors globally about proxy decisions and helps process votes.
Analysts said another factor on Singapore's side is that CNAHC hasn't secured approval for a counterbid from the State-owned Assets Supervision and Administration Commission, which oversees China's state-owned enterprises.
They said Singapore Air and Temasek gained approval for their offer after months of negotiations, and SASAC is unlikely to put its international credibility at stake by allowing CNAHC to make a competing bid.
One analyst said CNAHC has held back from communicating its plan for a counterbid directly to shareholders because it would need SASAC's approval to do so.
He said CNAHC's announcement Tuesday simply means that if the shareholders vote against the deal, there could be a better offer in the future.
"CNAHC hasn't told investors it will pay HK$5 a share, but it's leaking the figure to the media," the analyst said. "In order to make a competing bid, CNAHC needs the approval from SASAC - and it probably can't get it by January 8."
China mutual fund industry nearly quadruples in 2007 January 3, 2008 - 5:16PM
China's mutual fund industry nearly quadrupled in 2007 as millions of investors rushed to convert their bank deposits for higher returns in the stock market, state media said Thursday.
Net assets of China's 363 mutual funds totalled 3.3 trillion yuan (450 billion US dollars) by the end of 2007, up from 856.5 billion yuan a year earlier, the China Securities Journal reported, citing data from Galaxy Securities.
A survey conducted late last year showed that 83 percent of 14,800 respondents thought mutual funds were the first choice for wealth management, the report said.
Mutual funds are particularly attractive to Chinese who are eager to profit from the booming stock market, analysts said, adding that with around 16 trillion yuan in bank deposits the trend may well continue.
"People are willing to invest their money, and they've been keen to shift from the low-return bank deposits to mutual funds where experts handle their funds," said Yi Linming, an analyst with Industrial Securities.
"Once they realise investing in mutual funds is more profitable and less risky than buying individual stocks by themselves, they just swarm to funds. It's the herd instinct," said Yi.
China's stock market rose about 97 percent after a volatile 2007 despite a 18 percent decline in the key index in November -- its biggest monthly drop since July 1994.
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Singapore’s GDP Unexpectedly Shrinks on Weaker Output
Jan. 2 (Bloomberg) -- Singapore’s economy unexpectedly contracted for the first time in 4 1/2 years as factory output slowed, suggesting Asia’s export-dependent markets may face increased risks from weaker global growth.
Gross domestic product shrank an annualized 3.2 percent last quarter after adjusting for inflation, from a revised 4.4 percent expansion in the previous three-month period, the trade ministry said today. Economists had expected a 3.1 percent gain.
Singapore is first in Asia this year to report fourth- quarter figures, giving analysts an insight into how turmoil in global markets and the subprime-mortgage crisis in the U.S., the region’s biggest export destination, may affect Asian economic expansion. South Korea and Taiwan have already warned easing demand for semiconductors, mobile phones and computers portends weaker growth in 2008.
‘‘We definitely should expect to see more softness in exports in the next couple of quarters, and that’s bad news for electronics-heavy Asian economies,’’ said Kit Wei Zheng, an economist at Citigroup Inc. in Singapore. ‘‘That means slower growth for Singapore and the rest of Asia.’’
The Singapore dollar rose 0.1 percent to S$1.4391 per U.S. dollar by 7:59 p.m. in Singapore. The benchmark Straits Times Index fell 0.6 percent to 3,461.22.
Asia is twice as reliant on exports as the rest of the world, with 60 percent of overseas sales ultimately destined for the U.S., Europe and Japan. China and South Korea are due to report fourth-quarter GDP numbers later this month, while Japan and Taiwan are scheduled to release theirs in February.
Factory Output
Singapore’s manufacturing climbed 0.5 percent in the last three months of 2007 from a year earlier, the smallest increase in 18 quarters. Output growth slowed from a revised 10.3 percent in the July-September period as pharmaceutical plants produced fewer drugs, the trade ministry said.
The Asian Development Bank last month said growth in emerging East Asia in 2008 will be 8 percent, half a percentage point lower than last year.
Singapore’s $132 billion economy grew 6 percent in the fourth quarter from a year earlier after gaining a revised 9 percent in the previous three months. Economists expected 7.7 percent growth.
‘‘There’s no imminent turnaround in electronics and we’re unlikely to see a recovery in the next six months,’’ said Irvin Seah, an economist at DBS Group Holdings Ltd. in Singapore. ‘‘Pharmaceuticals, a key support for manufacturing, have been losing steam.’’
Electronics Slump
Singapore’s electronic exports have dropped each month since February, mired in the worst slump in five years. South Korea yesterday lowered its growth forecast for 2008, pointing to the likelihood of slowing exports. Taiwan is also predicting an easing in overseas shipments this year which it said will make its growth target ‘‘highly challenging.’’
Hynix Semiconductor Inc. Chief Executive Officer Kim Jong Kap last week told employees of the world’s second-largest maker of memory chips, based in Ichon, South Korea, that ‘‘a difficult period’’ is foreseen for the first quarter or the first half.
South Korea’s exports rose a less-than-expected 15.5 percent in December from a year earlier, the Commerce Ministry reported today. Overseas shipments are forecast to increase 11.6 percent in 2008, the ministry said. Singapore’s services industry climbed 8.3 percent, matching the growth rate in the previous three-month period.
Stocks Tumble
Economists said demand for financial services probably eased as the rout in global credit markets increased risk aversion and the city-state’s government implemented measures to cool the property market.
Global stock markets have lost $1.6 trillion in value since October and the collapse of the subprime-mortgage market in the U.S. triggered more than $80 billion in writedowns among the world’s largest banks.
‘‘Singapore’s financial services industry has been affected by the shadow of the subprime problem,’’ Seah said. ‘‘Investors are more cautious and that has slowed down activity.’’
The island’s burgeoning construction industry prevented a wider contraction in the economy last quarter as companies such as Exxon Mobil Corp. set up new plants and property developers build new office towers and condominiums. Southeast Asia’s fourth-largest economy reported a record S$16 billion ($11 billion) in fixed-asset investments last year.
Construction surged 24.4 percent from a year earlier, after a revised 19.2 percent gain in the three months ended September.
The economy advanced 7.5 percent in 2007, easing from a 7.9 percent rate of expansion the year before. The government expects growth to be between 4.5 percent and 6.5 percent in 2008.
Singapore’s growth had raised concern the economy is overheating, with consumer prices rising at the fastest pace in more than 25 years. Policy makers expect inflation to be between 3.5 percent and 4.5 percent this year, accelerating from a forecast average of 2 percent in 2007.
The figures today are computed from data for October and November. Revised numbers, including nominal gross domestic product, will be released next month.
Shanghai May Restrict Home Purchases, Shanghai Daily Reports
Jan. 2 (Bloomberg) -- Shanghai may introduce new policies to restrict people without local permanent residence permits from buying homes in the city, seeking to curb property speculation, the Shanghai Daily reported, without saying where it got the information.
The initiative, announced last week by the municipal government, will make it harder for speculators from other parts of the country to buy residential properties in Shanghai in the future if they don't have legal-residence permits, the newspaper said, citing Xue Jiangxiong, head of research at Shanghai Youwin Real Estate Information Service Co.
The Shanghai Housing and Land Resources Administration Bureau will work jointly with local development and reform and public security departments to draft such policies, the report said. No timetable was released, it said.
Gay masseurs available in M'sia
Masseurs perform their task naked. -The Star
Thu, Jan 03, 2008
The Star
Kosmo! reported that a massage parlour in Kuala Lumpur is offering the services of gay masseurs.
What is so special about the massage is that the masseurs would perform the task naked.
The daily's reporter, who went undercover as a customer, found these masseurs earned up to RM3,000 a month or RM150 on a good day minus their commissions.
Some customers would ask for "extra services" which cost between RM100 and RM150.
"This job is relaxing and it pays well," said one of the masseurs.
The gay masseurs included locals as well as foreign workers from Myanmar, Pakistan, Thailand and the Philippines.
中国石油A股(601857)上市前后的阴谋论：“对财富贪婪的追逐让某些人失去最基本的道德和良知。”
瑞银证券 = UBS Securities
"中石油套牢全中国" 监管滞后与发审弊端值得反思
来源： 信息时报 2007-12-28
已经上市近两个月的中国石油最近再次成为社会关注的焦点，而事件的主角已经由中石油变成了瑞银证券。作为中石油A股发行的联合主承销商之一，瑞银集团因在中石油A股上市前后的反常表现而受到国内媒体的广泛诟病；而中石油董事长在A股上市当天一番“回馈内地股民”的慷慨陈辞早已成为被套股民的笑柄。除此之外，有关新股发行审批的争论自中石油上市后更加激烈，监管层应为“中石油48元血案”负责的声音不绝于耳。
广发证券研究员张万成认为，中石油如此高价发行也是监管层始料未及的。尽管中国证券市场在本轮牛市中取得了长足的进步，但在体制建设、风险控制、法规完善等诸多方面仍有许多需要完善的地方。中石油事件值得各方面认真反思。
事件回顾：神话的诞生与破灭
2007年9月24日，中石油回归A股市场获证监会发审委批准。时值大蓝筹股价狂飙突进，带动上证指数从3600点起步一路小跑，首次站上5500点关口，随之而来的是建行的正式上市和神华网上申购，申购冻结资金一再刷新历史记录……市场一片繁荣景象，令很多投资者对即将上市的号称“亚洲最赚钱公司”的中国石油充满了期待。
国庆之后的第2个交易日，中国神华上市，36.99元发行首日被炒高到近70元，此后3个交易日更是连续3天涨停，股价飙高至90元以上，上市4天股价翻了1.5倍，市场有人惊呼：中国神华创造了神话，中石油可能复制神话！
而此时中石油的上市准备工作正在紧锣密鼓的进行当中，10月22日发布《招股意向书》，10月25日网上路演确定网上申购价16.70元/股，10月26日网上申购冻结资金超过3.66万亿再次刷新新股申购冻结资金记录，10月30日公布中签率公告，1.94%的中签率令大部分申购者乘兴而来，失望而归。
11月5日中国石油正式登陆上交所，当天开盘价达到48.62元，但投资者仍然疯狂买入，首日换手率高达51.58%。随后中石油股价接连下挫，在40元以上买入的900多亿资金全数被套。截止昨天收市，中石油股价仅为31.39元，较首日开盘价跌去35.41%，被套资金已超过1000亿元。有券商直言不讳地表示，中石油已进入中期横盘整理中，无论上涨和下跌都存在巨大压力，高位套牢者短期内解套无望。
风声四起：泡沫论与阴谋论
“中石油上市套牢全中国？”这是中石油上市后被套散户发出的质疑声。而早在中石油上市前，国内某券商就曾对当时充斥市场的蓝筹泡沫公开质疑，特别是对基金公司炒作蓝筹的行为直呼“看不懂”。而这期间正是建行、中国神华和中石油3大海外蓝筹集中回归的高峰期，在市场对蓝筹股的非理性追捧下，建行上市8天上涨超过50%，神华上市4天股价翻了1.5倍，这些因素都促使当时的投资者对中石油产生了过高的期望。“复制神华走势”，“首日股价上50”等传闻甚嚣尘上，仅有的一点理性声音也都被忽视了。
比泡沫论更得人心的就是阴谋论。根据近日某媒体调查披露，在确定作为中石油A股发行的主承销商后，瑞银集团旗下设在世界各地的子公司通过各种渠道在香港市场增持了超过300股中石油H股；而在中石油即将回归A股的消息刺激下，从9月底到10月初，中国石油H股股价从13.80港元迅速飙升至20港元，累计升幅达到32%。而在中石油上市后，瑞银旗下公司开始逐步抛售中石油，但瑞银证券却发布报告称建议买入中石油。通过信息的不对称与内幕交易，瑞银在中石油发行前后大赚了一笔，而广大中小股民却因此蒙受巨大损失。
行业反思：监管滞后与发审弊端
与上市前的造钱神化对应的是，在中石油上市后有关“中石油48元血案”、“中石油吹响牛市终场哨”的愤懑与悲观情绪开始在股民中流传，“谁该为中石油天价发行买单？”的问责声首先在民间和媒体中出现，并进而引起证券业内与监管层的反思。
广发证券宏观经济研究员张万成博士表示，中石油如此高价发行也是监管层始料未及的，尽管中国证券市场在本轮牛市中取得了长足的进步，但在监管体制、风险控制、法规等诸多方面仍有许多需要完善的地方，从“5·30”到中石油，今年股市的两大事件值得各方面认真反思。
中国政法大学刘纪鹏教授表示，从中石油事件中暴露的一个问题是，目前我们的新股发行审批方式需要改变。现在一级市场囤积资金确实很多，那些大的机构，几百亿甚至上千亿的资金天天参与打新，导致中签率低下普通投资者难以在中石油这样的优质股票上市时分享收益。而当打新资金越来越多，参与二级市场的资金越来越少时，股价下跌甚至跌破发行价是迟早的事。因此我一直赞成新股发行由资金摇号变为账户摇号的做法，其实在国外一直有对老股东和已经入市的股东优先照顾的做法，这个过程有些是通过对各个券商给自己的老客户发放，而不是说专门地培养一个依附在资本上又不承担任何风险的群体，这对金融秩序本身也是一种破坏。
曾淵滄：08年第1擊翻兜錦江
2008-01-03
2008年第一個交易日，出師不利，恒生指數下跌252點，不過，港鐵（066）則創新高，破30元大關，其他地產股表現也不太差。現在，我們應該把港鐵列入地產股，將來港鐵的主要利潤來源將是賣樓收入。本月30日，美國聯邦儲備局會再開會議息，預料仍會減息0.25厘，也許，到了本月中，又會出現炒減息的現象。現在，恒指走勢仍然不離雙底反彈之勢，能不能升破3萬點，或反彈不成，跌破26000點皆是關鍵。2008年是北京奧運年，奧運概念股在2006年已開始炒，當時奧運概念熱炒股之一是錦江酒店（2006）。此股上市後曾經熱炒一陣，在2006年年底我也曾經推薦過這隻股，可惜炒風持續不足兩個月就出現一浪低過一浪的走勢，最低價更是低過3元。現在，奧運年終於來臨，奧運概念股有可能出現翻炒。昨日，錦江酒店股價竟然躋身入20大上升股的行列，成交也不少，超過2億元。昨日，我決定2008年的第一擊就是追入這隻股，算是新年開張第一宗交易，投資額不多,希望贏個彩。
期待匯控業績差勁
下個月，我的愛股匯控（005）會宣佈2007年全年業績，我希望業績不好，越差越好，越差就越有機會買便宜股。作為超長線的投資，只有壞消息出現時才可以買，千萬不能高價追貨。
去年我的投資策略相當保守，也靠這個保守策略才令得來不易的利潤不至於消失。現在，悲觀的人已開始增加，我反而開始樂觀，大家不要忘記港股直通車，港股直通車必定要開，這是中央政策，這是中國政府檢查、試驗人民幣自由流通、自由兌換的重要過程之一。去年直通車消息一公佈，恒指狂升60%才導致溫家寶總理親自出來講話，解釋為甚麼直通車得暫停。現在，內地A股已連續調整多個月，港股也同樣調整兩個多月，只要中央認為內地股民已經學到了相當的風險概念，直通車就會開通。如何學習風險概念？方法很簡單，就是讓股民虧錢。每個人都是從虧錢中學習到何謂風險，如何做好風險管理……
下個月，除了匯控會公佈2007年的全年業績，許許多多企業都會公佈2007年的全年業績，相信業績好的還是佔多數，這也對股市有一定的刺激作用。
0047 GMT [Dow Jones] STOCK CALL: OCBC Investment Research starts China Oilfield Technology Services (DT2.SG) at Buy with S$1.01 fair value, based on 22X FY08 earnings. Says oil recovery specialist poised to benefit as production at China’s aging oilfields "showing alarming signs of peaking" while oil demand remains strong. Notes company has proven its prowess in tertiary oil arena with its market leadership in tertiary oil recovery equipment in China’s flagship Daqing oilfields, which contributed nearly 25% of country’s total annual oil production in 2006. Adds phase 1 of firm’s new production complex set to increase FY06 capacity by at least 5X; "COT has the ability to accelerate its growth and also diversify in terms of geography and business." Stock closed down 0.6% at S$0.81 yesterday. (FKH)
Fed Officials Lowered Growth Outlook at Last Meeting
Jan. 2 (Bloomberg) -- Federal Reserve officials said economic growth in 2008 will fall short of their own forecasts, reflecting weaker consumer spending and a deeper housing slump.
Policy makers “agreed on the need to remain exceptionally alert to economic and financial developments and their effects on the outlook,” the Federal Open Market Committee said in minutes of the Dec. 11 session, released today in Washington. “Members would be prepared to adjust the stance of monetary policy if prospects for economic growth or inflation were to worsen.”
Fed officials anticipated growth that was “somewhat more sluggish” than they projected in October, while refraining from signalling a bias to lower rates further, citing “heightened
uncertainty.” By contrast, traders predict December’s quarter point cut in the benchmark interest rate will be followed by reductions at the next two meetings to stave off recession.
“The tone of the Fed minutes suggests more cuts to come,” said Alan Skrainka, chief market strategist in Des Peres, Missouri, at Edward Jones & Co., which oversees $485 billion. The economy isn’t performing as “they thought it would, and conditions in the credit and housing markets continue to erode since the last meeting.”
Some FOMC members said the chance of further tightening of lending standards may restrain economic expansion and “require a substantial further easing of policy.” At the same time, officials judged that a rapid improvement in financial conditions would mean “a reversal of some of the rate cuts might become appropriate,” the minutes showed.
Treasury Rally
Treasury notes stayed higher after the report. The yield on the benchmark 10-year note fell to 3.91 percent at 4:13 p.m. in New York, from 4.03 percent late Dec. 31.
The Fed also said that one official opposed last month’s agreement to provide dollars to European central banks to help meet banks’ funding needs. St. Louis Fed President William Poole dissented, saying the deal was “unnecessary” because of the size of the European Central Bank’s and Swiss National Bank’s dollar reserves.
Poole wasn’t immediately available to respond to questions, spokesman Joe Elstner said.
The Dec. 11 quarter-point cut disappointed investors seeking a larger move and caused the biggest stock sell-off after a Fed decision since Chairman Ben S. Bernanke, 54, took office in 2006. Bernanke, approaching the midpoint of his four- year term, has sought to separate the Fed’s strategies of extending the six-year economic expansion and alleviating
financial strains.
‘Somewhat Restrictive’
Policy makers at the meeting judged monetary policy to be “somewhat restrictive,” with growth risks increasing, the minutes said. The report contains no mention of debate over the size of the rate reduction other than a mention of Boston Fed President Eric Rosengren’s dissent in favour of a half-point move.
Traders increased bets today the Fed will lower the target rate for overnight loans between banks by a half-point to 3.75 percent on Jan. 30. The likelihood rose to 26 percent, from zero yesterday, based on contracts quoted on the Chicago Board of Trade. Futures show a 74 percent chance of a quarter-point move.
Investors anticipate that policy makers will lower borrowing costs further to help sustain the six-year economic expansion. The Institute of Supply Management today reported that its gauge of U.S. manufacturing slumped to the weakest in almost five years.
Squeeze Eased
Signs of distress in bank funding and credit markets have diminished since the Fed acted in concert with counterparts in Europe to inject funds into money markets. The Fed, ECB, Swiss National Bank, Bank of England and Bank of Canada announced the initiative a day after the FOMC meeting.
The premium of three-month dollar loans between banks over U.S. Treasury bills maturing in the same period fell today to the lowest in almost two months. The so-called ted spread has fallen as the three-month London Interbank Offered Rate for the dollar dropped to 4.68 percent from 5.13 percent Dec. 10.
The U.S. central bank last month introduced a new tool, the Term Auction Facility, to provide funds to banks beyond the one- day maturity in the federal funds market. The Fed held two auctions totalling $40 billion and plans two this month, with continued sales “for as long as necessary,” the Fed said Dec. 21.
Fed officials also announced Dec. 12 a $24 billion swap-line with the ECB and Swiss National Bank to help meet demand for dollars among banks in Europe.
Conference Call
Today’s minutes disclosed that the FOMC and Board of Governors discussed the auctions and swaps in a Dec. 6 conference call. The Board of Governors approved the auction facility in a Dec. 10 notation vote, the minutes showed.
“A few” officials “questioned the need for and the likely efficacy of the proposal, expressed concerns about the longer-run incentive effects of a TAF, and felt that the possible drawbacks could well outweigh any benefits,” minutes of the Dec. 6 call said.
The U.S. economy, the world’s largest, grew at a 1 percent pace in the fourth quarter after expanding at a 4.9 percent rate the previous three months, according to the median estimate of economists surveyed by Bloomberg News last month. Growth for all 2008 is projected at 2.3 percent.
The Fed’s statement last month said that “some inflation risks remain.”
Inflation Rate
Inflation, measured by the Commerce Department’s personal consumption expenditures price index minus food and energy, was 2.2 percent in November, the highest since March. Fed officials in October forecast the “core” gauge will rise 1.6 percent to 1.9 percent in 2010, an indication of their preferred longer-term range.
While Fed policy makers expected core inflation to “trend down a bit over the next few years,” officials were still “concerned about upside risks to inflation stemming from elevated prices of energy and non-energy commodities; some also cited the weaker dollar.”
Housing figures show the industry has yet to indicate a bottom to the slump, now in its third year. In November, sales of new homes fell more than economists forecast to a 12-year low, while sales of previously owned homes unexpectedly rose only as prices declined, reports showed the past week.
“Participants agreed that the housing correction was likely to be both deeper and more prolonged than they had anticipated in October,” the minutes said.
Rosengren Dissent
Rosengren, in his first dissent, saw “heightened risk of continued economic weakness” from housing, consumer spending and financial markets, the minutes said.
Investors may get more detail on the Fed’s direction in remarks from Vice Chairman Donald Kohn tomorrow at a conference in New Orleans. In November, Kohn reinforced forecasts for a December rate cut by highlighting concern about “deterioration” in financial markets.
Also, the Labour Department on Jan. 4 will release its monthly employment report, among the most closely watched releases for Fed officials and economists.
'Stock' beats 'sex' in Google China keyword searches
BEIJING - THE names of three banks and the word 'stocks' beat 'sex' to become four of the most Googled words in China last year, according to a Google China list seen on Thursday.
China Merchants Bank, Industrial and Commercial Bank of China and China Construction Bank ranked second, third and sixth, according to a list supplied by Google China on its website www.google.cn.
'On the Chinese mainland, it was money and technology that took the honours last year,' the China Daily said, pointing out that 'sex' was the most popular keyword for Google users in some other countries.
Fourth on the list was 'stock', not surprising with Shanghai shares having risen 97 per cent last year. At number 1 was 'QQ', a Chinese instant message service and a brand of car.
China's Central Bank, the Ministry of Finance and Banking Regulatory Commission ranked first, third and fifth in the 'Most Popular Departments' list, the Web site said.
In another list named 'qiu zhi', or 'seeking knowledge', 'what is a blue chip' and 'how to invest in the stock market' were the most searched questions on Google in China, while 'what is love' and 'how to kiss' ranked top of the global list.
China keeps a tight rein on Internet content and has launched several campaigns to root out online pornography, perhaps one reason why 'sex' did not score so well. -- REUTERS
Air China Parent: Still Hoping CEA-SIA Deal Will Be Amended
HONG KONG (Dow Jones)--China National Aviation Holding Co. said Thursday it hasn't received any proposal from China Eastern Airlines Corp. (CEA) that would change its view against the Shanghai-based carrier's proposed stake sale to Singapore Airlines Ltd. and Temasek Holdings Pte.
The state-owned parent of Air China Ltd. (0753.HK), which holds 12.07% of the Hong Kong-listed shares of China Eastern, said it is still hoping that the stake sale deal can be amended.
"We cannot accept an unamended deal," CNAHC said.
The company said if China Eastern's shareholders vote down the tie-up with Singapore Airlines in a meeting Tuesday, it will table its own proposal to acquire China Eastern's shares.
CNAHC said in a statement Tuesday it believes the HK$3.80 per-share price offered by Singapore Airlines and Temasek for a combined 24% stake in the airline doesn't reflect China Eastern's fair value.
CNAHC said the anti-dilution rights and a non-competition clause granted by China Eastern to the Singapore companies "fail to treat other shareholders of China Eastern equally."
CNAHC has requested China Eastern to conduct further discussions with Singapore Airlines and Temasek, and amend relevant clauses to make a "practical plan acceptable to us."
A person familiar with the situation said earlier Thursday CNAHC is planning a counterbid for a stake in China Eastern for around HK$5 a share.
The planned counterbid is aimed at pre-empting the proposed CEA-Singapore Airlines tie-up.
However, the person also said a decision on a counterbid hasn't yet been finalized.
Analysts upbeat on China stocks this year
3 January 2008
Although the stock market rally in the past year seems to have lost much of its steam, analysts remain confident of the upward trend, albeit at a much more moderate curve.
Any notion of a possible meltdown has been largely discarded as the market still basks in ample liquidity. The rumblings of the US subprime mortgage crisis sound nothing more than a vague and distant threat.
So far, government credit tightening measures, including interest rate increases, have made only short-lived impacts on investor sentiment because of the lack of leveraged trading. What’s more, the huge supply of new scrips in various mega IPOs were absorbed without causing any durable liquidity strain.
What’s helped cool down the stock market fever a little is growing investor concern about overvaluation and a possible slowdown in corporate earnings growth. But with so much liquidity swishing around the system, none of these factors could squeeze out the market bull.
“The excess liquidity in the Chinese economy is unlikely to disappear anytime soon,” said Shen Minggao, an economist at Citigroup.
Shen added that the rising trade surplus and current surplus had led to speculation on currency appreciation. Capital inflows through direct investment and current account activities have also surged.
In addition, recent re-pricing of risk amid the subprime crisis in developed markets and expected Fed cuts would mean more capital inflows to emerging market economies.
“We expect in the near term a range-trading or even market correction in the coming months,” said Jerry Lou, an economist at Morgan Stanley. But as the ample liquidity still remains, “we are likely to stay bullish for most of 2008”.
The government has also announced some measures to encourage capital outflows, including the qualified domestic institutional investor system and the “through train” for individuals to invest in the Hong Kong stock market.
Shen said a liquidity crunch is unlikely in the near term given foreign investors’ increasing interest in renminbi assets, but a reversal of liquidity flows is still likely as long as the global market remains volatile.
Corporate earnings growth is expected to slow with the weak stock market performance because at least one-third of the earnings growth was a result of the booming market from revaluations of investment portfolios and capital gains, experts said.
“Headline earnings growth could easily disappoint due to the role of stock market gains in the profit numbers this year,” said Jonanthan Anderson, senior economist at UBS Investment Research.
But analysts said a massive market sell-off or meltdown is unlikely.
“The stock market collapse is not expected to happen because there is no margin trading system in China,” said Cao Honghui, a researcher with the Chinese Academy of Social Sciences. Unlike the US consumer, who borrows about 60 percent of what he or she spends, Chinese consumers are borrowing less than 5 percent.
“We could view a market correction as canceling some positive effects from the recent rally. Given the authorities’ priorities to maintain social and economic stability, the scenario of a sharp market correction doesn’t look likely in the short term,” said Shen.
Experts said stocks in the consumer sector, such as consumer products, retail and telecom, are worth investing this year as their earnings are based on much safer and strong volume growth.
Asset-price-sensitive sectors, including banks, insurance, real estate, oil and material are more dangerous to invest in because of their exposure to tightening risks and US recession.
“Medical consumption companies and electrical appliance companies are expected to perform well because the government is expected to invest significantly in the social security and healthcare systems,” said Gui Haoming, chief analyst at Shanghai Shenyin Wanguo Securities.
“Following slower year-on-year credit growth, financial institutions should also see slower profit growth in the fourth quarter as the government calls for credit tightening,” said Shen.
Shen added that share prices of listed banks could be under pressure, and non-performing loans at some banks could build up if firms suffer from financial distress in the near future. Those who rely more on interest income may suffer the most.
Air China Parent Plans CEA Bid; SIA Won't Blink
SINGAPORE (Dow Jones)--China National Aviation Holding Co. is planning a counteroffer for a stake in China Eastern Airlines Corp. (CEA) at around HK$5 a share, but Singapore Airlines Ltd. (C6L.SG) won't be lured into a bidding war, people familiar with the situation said Thursday.
The move by the parent of Air China Ltd. (0753.HK) would aim to pre-empt the deal that the Shanghai-based carrier has with Singapore Airlines and its parent Temasek Holdings Pte., in which the Singaporean companies will acquire a combined 24% stake in China Eastern at HK$3.80 a share.
Shareholders of China Eastern are scheduled to vote Tuesday to ratify the Singapore Air tie-up.
CNAHC said Thursday if China Eastern's shareholders vote down the tie-up with Singapore Airlines, it will table its own proposal to acquire the China Eastern shares.
"The developments are still changing right now...(CNAHC and China Eastern) could even broker a deal in the next few days and the counteroffer may be called off," said a person familiar with the situation.
He said, however, that it is "quite clear" CNAHC will vote against the deal at Tuesday's meeting. The state-owned company owns 12.07% of China Eastern's Hong Kong-listed shares.
Regardless of what happens in China, Singapore Airlines and Temasek have no plans to match or top any counterbid.
"If the vote goes against the deal there is not a plan B which would see an immediate lifting of the price," a person familiar with the deal in Singapore said.
SIA Chief Executive Chew Choon Seng told reporters in Beijing last month that its HK$3.80-a-share offer was the ceiling, and that it was up to the shareholders of China Eastern to decide.
"Nothing has changed from that position," another person said.
In a statement Thursday, CNAHC said it hasn't received any proposal from China Eastern that would change its stance against the proposed stake sale to the Singaporean companies. CNAHC had said Tuesday it believes the price offered by Singapore Airlines and Temasek doesn't reflect CEA's fair value.
"We cannot accept an unamended deal," CNAHC said.
CNAHC said it has requested China Eastern to conduct further discussions with Singapore Airlines and Temasek, and amend relevant clauses to make a "practical plan acceptable to us."
The deal requires the approval of two-thirds of China Eastern's minority holders of both A and H shares.
At the moment, China Eastern's parent, China Eastern Air Holding Co., owns 59.67% of China Eastern. A further 8.14% of the company is publicly traded in Shanghai via A shares, while 32.19% of the company is publicly traded in Hong Kong via H shares.
China Eastern Air Parent Says Bid Reasonable
China Eastern Air Holding Co. said Thursday it believes the price offered by Singapore Airlines and Temasek is reasonable.
It said that the comments made by CNAHC lack "independence and objectivity," as CNAHC is both a shareholder of China Eastern and a major competitor.
The SIA-Temasek offer, which is backed by both the China Eastern board and the Chinese government, was also endorsed by Institutional Shareholders Services Inc.
"(Given) the lack of an alternative offer for fresh capital, and the expected benefits arising from a strategic partnership with a world-class airline operator with an extensive international network and expertise, as well as a world renowned brand name, we recommend shareholders vote in favor of these resolutions," an ISS note to institutional shareholders dated Dec. 21, seen by Dow Jones Newswires, said.
ISS is a proxy-research firm headquartered in Rockville, Maryland, which makes recommendations to more than 2,000 institutional investors globally about proxy decisions and helps process votes.
Analysts said another factor on Singapore's side is that CNAHC hasn't secured approval for a counterbid from the State-owned Assets Supervision and Administration Commission, which oversees China's state-owned enterprises.
They said Singapore Air and Temasek gained approval for their offer after months of negotiations, and SASAC is unlikely to put its international credibility at stake by allowing CNAHC to make a competing bid.
One analyst said CNAHC has held back from communicating its plan for a counterbid directly to shareholders because it would need SASAC's approval to do so.
He said CNAHC's announcement Tuesday simply means that if the shareholders vote against the deal, there could be a better offer in the future.
"CNAHC hasn't told investors it will pay HK$5 a share, but it's leaking the figure to the media," the analyst said. "In order to make a competing bid, CNAHC needs the approval from SASAC - and it probably can't get it by January 8."
SASAC has yet to comment on the deal.
China mutual fund industry nearly quadruples in 2007
January 3, 2008 - 5:16PM
China's mutual fund industry nearly quadrupled in 2007 as millions of investors rushed to convert their bank deposits for higher returns in the stock market, state media said Thursday.
Net assets of China's 363 mutual funds totalled 3.3 trillion yuan (450 billion US dollars) by the end of 2007, up from 856.5 billion yuan a year earlier, the China Securities Journal reported, citing data from Galaxy Securities.
A survey conducted late last year showed that 83 percent of 14,800 respondents thought mutual funds were the first choice for wealth management, the report said.
Mutual funds are particularly attractive to Chinese who are eager to profit from the booming stock market, analysts said, adding that with around 16 trillion yuan in bank deposits the trend may well continue.
"People are willing to invest their money, and they've been keen to shift from the low-return bank deposits to mutual funds where experts handle their funds," said Yi Linming, an analyst with Industrial Securities.
"Once they realise investing in mutual funds is more profitable and less risky than buying individual stocks by themselves, they just swarm to funds. It's the herd instinct," said Yi.
China's stock market rose about 97 percent after a volatile 2007 despite a 18 percent decline in the key index in November -- its biggest monthly drop since July 1994.
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