SHANGHAI, Feb 4 - In a sign of how important the stock market has become to China’s leaders, the ruling Communist Party came to the market’s rescue on Monday by running criticism of a planned $22 billion share sale in its top newspaper.
The stock market soared more than 8 percent after the People’s Daily, the party’s mouthpiece, published a commentary denouncing the mammoth fund-raising plan by Ping An Insurance for hurting investor confidence and contributing to a market slide.
Fund managers said the criticism almost guaranteed Ping An would not be able to proceed with the plan -- China’s biggest equity sale and one of the world’s largest -- in its present form.
That was a relief to investors, who had been terrified that investors might not be able to absorb such a huge equity offer.
It could for the time being reduce speculation that Ping An might soon make a big foreign acquisition. Last month, shares in British insurer Prudential surged 14 percent in three days on talk Ping An might want the money to buy a big stake in it.
The commentary also showed that despite dramatic growth in size and sophistication over the past two years, China’s stock market still moves at the whim of the government -- which remains happy to push stocks around when it feels that is necessary.
“The government’s attitude of course remains a key factor for China’s stockmarket,” said analyst Zhou Lin at Huatai Securities. “Today, it was a particularly big factor.”
VAGUE
Last month, China’s second biggest life insurer said it would sell up to 1.2 billion new local-currency A shares and 41.2 billion yuan of convertible bonds. The offer could have raised some 160 billion yuan based on Ping An’s share price at the time.
Ping An did not detail the plan’s timing or mechanics, saying merely that the money would be used as capital and for unspecified acquisitions. The plan contributed to a 21 percent plunge of the stock market’s main index over three weeks.
Monday’s commentary in the People’s Daily criticised the plan for its vagueness and its impact on the market.
“Ping An’s announcement did not clearly state the purpose of the fund-raising,” the commentary said.
“If the fund-raising plan was so big and the purpose wasn’t clarified, and the investment returns on it weren’t clear, and it just asked investors to stump up their cash, it’s no wonder that investors were unhappy.”
The commentary, titled “Reflections on Ping An’s huge fund-raising -- more regulatory efforts needed”, was not an editorial giving a formal policy position. But like most of the paper’s articles, it was believed to reflect authorities’ views.
Ping An spokesman Sheng Ruisheng, contacted by telephone on Monday, declined to comment on the commentary or on the outlook for the share offer. Late last month, he had continued to insist the fund-raising would go ahead as announced.
The firm has scheduled a minority shareholders’ meeting for March 5 to vote on the offer. Fund managers said the plan might well have been voted down anyway, but the expression of official displeasure appeared to make rejection certain.
“Ping An’s fund-raising plan is outrageous and will definitely be vetoed by shareholders,” said Chen Ge, fund manager at Fullgoal Fund Management in Shanghai.
Ping An’s Shanghai shares rose 7 percent on Monday and the stock index jumped 8.1 percent, its biggest gain since June 2005.
Other gestures of official support for the market, including the securities regulator’s approval of two new stock funds and the postponement of China Railway Construction’s $4 billion IPO at the regulator’s request, also helped to lift stocks on Monday.
But the People’s Daily commentary was important because it presented the Communist Party as a protector of small investors. It was written under the pen name “Lily”, but the name’s Chinese characters also evoke the word “harmony”, an apparent reference to President Hu Jintao’s calls for a “harmonious society”.
The commentary criticised regulators for being too loose in approving fund-raisings, and urged them to change their approach.
“Secondary fund-raisings by listed companies must not only benefit the companies themselves, but also investors and the healthy development of the stock market,” it said.
The commentary continued a tradition of influential pieces in the People’s Daily at the stock market’s turning points. In 1996, an editorial warning against “excessive speculation” launched a two-and-a-half-year bear market, and in 1999 a positive editorial triggered a bull market.
China's Stocks Rise by Most on Record: World's Biggest Mover
By Zhang Shidong
Feb. 4 (Bloomberg) -- China's benchmark stock index rose by a record 8.3 percent after the government allowed the sale of new stock funds and increased efforts to restore power supplies and transport links after the worst snowstorm in more than 50 years.
Aluminum Corp. of China Ltd. gained the most in five months and led a rally in commodities producers after its parent bought a stake in Rio Tinto Group. Citic Securities Co., the nation's largest brokerage, advanced as the stock regulator approved two new stock funds following the CSI 300 Index's worst weekly decline since the measure was compiled in April 2005.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, climbed 378.18 to 4,950.12 at the 3 p.m. close, the biggest fluctuation among indexes included in global benchmarks. All of the measure's 300 members rose, apart from 15 that were suspended or unchanged.
``We are probably already at a level where the regulators don't want to see a further decline in stocks,'' said Fan Dizhao, who helps manage the equivalent of $8.3 billion at Guotai Asset Management Co. in Shanghai.
Aluminum Corp. of China, the nation's biggest maker of the lightweight metal and also called Chalco, jumped 2.94 yuan, or by the 10 percent daily cap, to 32.34. The company's parent, known as Chinalco, and Alcoa Inc. bought an estimated 9 percent stake in Rio Tinto.
China Shenhua Energy Co. gained after a newspaper said its parent plans to buy a stake in Fortescue Metals Group Ltd.
An index of raw-materials producers rallied 8.9 percent for the biggest advance among 10 industries in the CSI 300 Index. Hunan Valin Steel Tube & Wire Co. gained 10 percent to 12.60 yuan, rebounding from a 16 percent slide last week after the Chinese steelmaker said power shortages had disrupted production.
Easing Storms
More than three weeks of snow in central and southern China brought transport networks to a standstill, killed at least 60 people and caused economic losses of at least 53.8 billion yuan ($7.5 billion). Snow and freezing rains in southern and eastern China are forecast to give way to clearer weather before the Chinese New Year begins in three days, the China Meteorological Administration said.
The storms have led several companies to warn profits may drop, prompting speculation authorities would act to boost growth. Stocks had more than doubled last year before the impact of six interest rate increases and a clampdown on bank lending.
Brokerages Advance
Citic Securities climbed 5.72 yuan, or 8.3 percent, to 75.03, its biggest gain since Nov. 2. The stock plunged 24 percent last month, compared with a 14 percent decline on the benchmark index. Haitong Securities Co., the nation's second- biggest publicly traded brokerage, surged 3.64 yuan, or 8.1 percent, to 48.65, its steepest advance since Oct. 24.
China's stock regulator approved two new stock funds, ending a five-month freeze, the Shanghai Securities News reported on Feb. 2. CCB Principal Asset Management Co. and China Southern Fund Management Co. will start closed-end funds, raising as much as 14 billion yuan ($1.95 billion), the newspaper said.
CCB Principal received approval to offer a 6-billion yuan fund, Beijing-based spokeswoman Ruan Yi said in a phone interview today. The regulator hasn't set a date for fundraising to begin, she said. China Southern Fund Management Co. also won approval to offer an 8-billion yuan fund, said Zeng Yihan, the firm's Shenzhen-based spokeswoman. Sales will begin after this week's Lunar New Holidays, Zeng said.
Shanghai Pudong Development Bank Co. and China Vanke Co. surged after the government said developers could borrow more to building cheap housing. Air China Ltd. and China Southern Airlines Co. rose after Citigroup Inc. said earnings at airlines likely climbed last year.
The following stocks rose or fell and the stock symbols are in brackets after companies' names.
Pudong Bank (600000 CH), the Chinese partner of Citigroup Inc., jumped 4.72 yuan, or by the 10 percent daily permitted limit, to 51.95. Vanke (000002 CH), the country's largest publicly traded developer, added 2.03 yuan, or 7.5 percent, to 29.03.
Developers of cheap housing will now have access to loans from a wider range of lenders, be required to put less of their own funds into projects and be eligible for discounted interest rates, the banking regulator and People's Bank of China said in a joint statement on their Web sites today.
China Merchants Bank Co. (600036 CH), the nation's biggest dual-currency credit-card issuer, advanced 3.12 yuan, or 9.4 percent, to 36.28.
Shenhua Energy (601088 CH), the nation's largest coal producer, advanced 4.89 yuan, or 8.6 percent, to 61.61. Parent Shenhua Group Corp. and China Investment Corp., which manages $200 billion in sovereign funds, are in talks to buy a 15.85 percent stake in Perth-based Fortescue from Harbinger Capital Partners, the South China Morning Post reported.
Fortescue has been in talks with potential investors, Executive Director of Operations Graeme Rowley said by phone from Perth, without naming the parties.
Coal stocks also rose after thermal coal prices at Australia's Newcastle port surged past $100 a metric ton for the first time, rising 25 percent to $116.44 in the week ended Feb. 1, according to the globalCOAL NEWC Index.
China Coal Energy Co. (601898 CH), the nation's second- largest coal producer, surged 2.22 yuan, or the 10 percent daily limit, to 24.42. Yanzhou Coal Mining Co., the listed unit of China's fourth-biggest coal miner, climbed 1.84 yuan, or 10 percent, to 20.20.
Air China (601111 CH), the world's biggest airline by market value, climbed 2.04 yuan, or 10 percent, to 22.45. China Southern (600029 CH), the nation's biggest carrier by fleet size, gained 1.98 yuan, or 10 percent, to 21.79.
Airlines in China likely boosted earnings last year due to demand for air travel and better-than-expected pricing ability, Ally Ma, a Citigroup analyst wrote in a report today. The carriers may also be shielded from a possible recession in the U.S. because of their domestic focus, Ma wrote.
South African, Australian Coal Climb to Records on Supply Curbs
By Angela Macdonald-Smith and Alistair Holloway
Feb. 4 (Bloomberg) -- Coal jumped to records at South Africa's Richards Bay and Australia's Newcastle port as production was curbed by power cuts and flooding, while snowstorms disrupted mining and transportation in China.
Coal at Richards Bay rose $12.20, or 12 percent, to $111.30 a metric ton, according to McCloskey Group Ltd. figures. Power- plant coal prices at the New South Wales port in Australia climbed $23.09, or 25 percent, to $116.44 a ton in the week ended Feb. 1, according to the globalCOAL NEWC Index.
``It is another indicator of tightness'' in supply of the fuel, Andrew Wells, an assistant editor at the Petersfield, England-based McCloskey, said by phone today.
The rising prices helped drive up coal producers' shares.
Centennial Coal Co., Australia's second-largest coal company by sales, gained 2.7 percent in Sydney trading and Gloucester Coal advanced 2.5 percent. China Shenhua Energy Co., the world's second-largest coal company, climbed as much as 5.5 percent in Hong Kong trading. U.K. Coal Plc rose as much as 2.2 percent in London.
Power shortages in South Africa forced Anglo American Plc to close mines last month.
Eskom Holdings Ltd., the nation's state-run power utility, is unable to meet demand after the government delayed a decision to expand generating capacity. Today it began cutting 1,500 megawatts of electricity to towns and cities and may have to reduce the supply by as much as 3,000 megawatts.
Supply Needed
Eskom needs 5.4 million metric tons of additional coal in the next three months to restore stockpiles to 20 days of consumption.
In Australia, BHP Billiton Mitsubishi Alliance is among mining companies that say they may miss deliveries after heavier-than-usual rain flooded pits in the world's biggest coal-exporting country.
Melbourne-based BHP Billiton Ltd., the world's biggest miner, said operations at its alliance with Mitsubishi Corp. may be affected for as long as six months.
The disruptions, in Queensland, are mostly affecting the now ``unbelievably tight'' metallurgical coal market, pushing up spot prices to about $200 or $210 a ton, Graham Wailes, a coal analyst at AME Mineral Economics Pty, said in Sydney.
China, the world's largest producer and consumer of coal, will halt exports until April after the worst snowstorms in 50 years.
China Snows
More than three weeks of snow in central and southern China have brought transport networks to a standstill, killed at least 60 people and caused economic losses of at least 53.8 billion yuan ($7.5 billion). The country, reliant on coal for 78 percent of its power, is restricting exports to boost domestic supplies.
Indonesia may be unable to increase production of thermal coal sufficiently to compensate for shortages of supply elsewhere in Asia, as it has in the past, Wailes said.
``I just don't think the supply solution is readily available and that's probably why you've had these huge increases,'' he said.
GlobalCOAL's monthly index for Newcastle thermal coal prices rose $1.71, or 1.9 percent, to $90.87 a ton in January, the fourth successive monthly record. Newcastle is the world's biggest coal-export harbor.
The increase will influence negotiations scheduled to begin between suppliers and buyers on contract coal prices.
JPMorgan, UBS
UBS AG, Europe's biggest bank by assets, on Feb. 1 raised its forecasts for thermal coal contract prices for 2008 and 2009, citing the coal ``crisis'' in China and disruptions in Australia. Prices may reach $100 a ton this year and $125 in 2009, from previous estimates of $90 and $110, the bank said.
JPMorgan on Jan. 29 said it raised its estimate for 2008 contract prices for power-station coal to $90 a ton, from $70.
It boosted forecasts of 2008 prices for coal used in steelmaking to $140 a ton, from $120. Those for thermal coal are $55.65 a ton for the year that started April 1, while coking coal contract prices are $98.38, JPMorgan said.
In Europe, thermal coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement in the third quarter advanced 25 cents, or 0.2 percent, to $127.50 a ton as of 12:27 p.m. in London, ICAP prices showed.
China's march on resources continues with four new foreign deals
David Robertson
Any doubt that the first shots in a new economic war have been fired were removed yesterday as Chinese companies announced four deals in the resources sector.
The deals came only two days after Chinalco, the state-owned aluminium company, took a 12 per cent stake in Rio Tinto - the largest share acquisition by the Chinese in a foreign company.
China's rush for resources comes as the Government seeks access to the metals, minerals and energy needed to feed its rapidly growing economy.
The moves announced yesterday with first-tier companies such as Anglo American and RusAl confirm that the Chinese have stepped up their attempts to gain control of foreign resource assets. Among the deals announced was a far-reaching strategic partnership between Anglo and the China Development Bank to “develop projects in China, Africa and elsewhere”.
Anglo did not put a value on the arrangement but it will give it access to Chinese funds to build new, multibillion-dollar mines.
RusAl, the Russian aluminium company, signed an agreement with the China Power Investment Corporation (CPIC) to create a giant metals partnership spanning Africa and China. Soco International, a British-listed oil company, sold a Yemeni oilfield to Sinochem Petroleum for $465million (£235million). Fortescue Metals, an Australian iron ore producer, said that it was in talks with suitors, thought to be China Shenua Energy and the China Investment Corporation.
The almost simultaneous announcement of the partnerships was a coincidence, but they have highlighted, nevertheless, China's growing presence in the resources sector, particularly coming so soon after the Chinalco-Rio Tinto share acquisition.
China is forecast to consume more than half of all the world's key resources within the next decade and the country is seeking to control mines and oilfields to ensure its supplies.
China is already the world's largest consumer of every big resource except oil and accounts for 47 per cent of all iron ore, 32per cent of aluminium and 25 per cent of copper.
What Would Buffett Buy? S&P's latest screen tracking the Berkshire bigwig's investing criteria uncovers 60 attractive names
by David Braverman
Warren Buffett has made his reputation as the World's Greatest Investor by taking the longer view—buying quality stocks with good earnings power and hanging on through bull and bear markets. During the past few decades, he has parlayed some well-chosen core holdings into an unparalleled record, not to mention an enormous personal fortune.
The stock of Buffett's company, Berkshire Hathaway (BRKA), topped the broader market in 2007 and 2006 after underperforming for a few years. Longtime Berkshire holders are sitting on impressive gains. Berkshire's book value per share has grown at a compounded annual rate of more than 20% over the past 40 calendar years. If you had invested $10,000 in Berkshire in January, 1968 (the shares closed at $20.50 on the last trading day of that month), your holding would be worth more than $50 million today.
How does he do it? Author Robert Hagstrom tried to compile Buffett's key investing strategies in his 1994 best seller, The Warren Buffett Way: Investment Strategies of the World's Greatest Investor. With Hagstrom's book as a source, Standard & Poor's Portfolio Services analyst David Braverman put together a stock screen that picks companies using criteria similar to those that fit the legendary investor's growth-oriented style. S&P updates this screen on a semiannual basis, during February and again in August.
How the Screen Works Over the years, the screen has put in a pretty good performance itself. From Feb. 13, 1995, through Jan. 17, 2008, the screen had an annualized return of 14.9%, vs. 8.2% for the S&P 500. In 2007, the screen stocks gained 15.7%, vs. 3.5% for the S&P 500. (All results reflect price appreciation only.)
It should be noted that these are not necessarily stocks that Buffett has bought or personally plans to buy. The list reflects only the criteria that Buffett has emphasized in the past.
Each time the screen is run, the stocks that were previously returned are "sold," and the new stocks are "purchased." There is 100% turnover each time the stock screen is run. The full criteria for this screen:
1. Owner earnings (cash flow less capital expenditures) above $50 million (changed in February, 2006, from $20 million)
2. Net margins of at least 15% for the trailing 12 months
3. Return on equity of at least 15% the previous quarter and in every year for the last three years
4. Retained earnings that have grown less than the market capitalization, on an absolute basis, in the last five years
5. Looking five years into the future, projected cash flow per share greater than the current market price for each stock (discounted to the present using the 30-year Treasury yield); this helps remove overpriced stocks from the list
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China’s party paper slams Ping An stock offer
SHANGHAI, Feb 4 - In a sign of how important the stock market has become to China’s leaders, the ruling Communist Party came to the market’s rescue on Monday by running criticism of a planned $22 billion share sale in its top newspaper.
The stock market soared more than 8 percent after the People’s Daily, the party’s mouthpiece, published a commentary denouncing the mammoth fund-raising plan by Ping An Insurance for hurting investor confidence and contributing to a market slide.
Fund managers said the criticism almost guaranteed Ping An would not be able to proceed with the plan -- China’s biggest equity sale and one of the world’s largest -- in its present form.
That was a relief to investors, who had been terrified that investors might not be able to absorb such a huge equity offer.
It could for the time being reduce speculation that Ping An might soon make a big foreign acquisition. Last month, shares in British insurer Prudential surged 14 percent in three days on talk Ping An might want the money to buy a big stake in it.
The commentary also showed that despite dramatic growth in size and sophistication over the past two years, China’s stock market still moves at the whim of the government -- which remains happy to push stocks around when it feels that is necessary.
“The government’s attitude of course remains a key factor for China’s stockmarket,” said analyst Zhou Lin at Huatai Securities. “Today, it was a particularly big factor.”
VAGUE
Last month, China’s second biggest life insurer said it would sell up to 1.2 billion new local-currency A shares and 41.2 billion yuan of convertible bonds. The offer could have raised some 160 billion yuan based on Ping An’s share price at the time.
Ping An did not detail the plan’s timing or mechanics, saying merely that the money would be used as capital and for unspecified acquisitions. The plan contributed to a 21 percent plunge of the stock market’s main index over three weeks.
Monday’s commentary in the People’s Daily criticised the plan for its vagueness and its impact on the market.
“Ping An’s announcement did not clearly state the purpose of the fund-raising,” the commentary said.
“If the fund-raising plan was so big and the purpose wasn’t clarified, and the investment returns on it weren’t clear, and it just asked investors to stump up their cash, it’s no wonder that investors were unhappy.”
The commentary, titled “Reflections on Ping An’s huge fund-raising -- more regulatory efforts needed”, was not an editorial giving a formal policy position. But like most of the paper’s articles, it was believed to reflect authorities’ views.
Ping An spokesman Sheng Ruisheng, contacted by telephone on Monday, declined to comment on the commentary or on the outlook for the share offer. Late last month, he had continued to insist the fund-raising would go ahead as announced.
The firm has scheduled a minority shareholders’ meeting for March 5 to vote on the offer. Fund managers said the plan might well have been voted down anyway, but the expression of official displeasure appeared to make rejection certain.
“Ping An’s fund-raising plan is outrageous and will definitely be vetoed by shareholders,” said Chen Ge, fund manager at Fullgoal Fund Management in Shanghai.
Ping An’s Shanghai shares rose 7 percent on Monday and the stock index jumped 8.1 percent, its biggest gain since June 2005.
Other gestures of official support for the market, including the securities regulator’s approval of two new stock funds and the postponement of China Railway Construction’s $4 billion IPO at the regulator’s request, also helped to lift stocks on Monday.
But the People’s Daily commentary was important because it presented the Communist Party as a protector of small investors. It was written under the pen name “Lily”, but the name’s Chinese characters also evoke the word “harmony”, an apparent reference to President Hu Jintao’s calls for a “harmonious society”.
The commentary criticised regulators for being too loose in approving fund-raisings, and urged them to change their approach.
“Secondary fund-raisings by listed companies must not only benefit the companies themselves, but also investors and the healthy development of the stock market,” it said.
The commentary continued a tradition of influential pieces in the People’s Daily at the stock market’s turning points. In 1996, an editorial warning against “excessive speculation” launched a two-and-a-half-year bear market, and in 1999 a positive editorial triggered a bull market.
China's Stocks Rise by Most on Record: World's Biggest Mover
By Zhang Shidong
Feb. 4 (Bloomberg) -- China's benchmark stock index rose by a record 8.3 percent after the government allowed the sale of new stock funds and increased efforts to restore power supplies and transport links after the worst snowstorm in more than 50 years.
Aluminum Corp. of China Ltd. gained the most in five months and led a rally in commodities producers after its parent bought a stake in Rio Tinto Group. Citic Securities Co., the nation's largest brokerage, advanced as the stock regulator approved two new stock funds following the CSI 300 Index's worst weekly decline since the measure was compiled in April 2005.
The CSI 300 Index, which tracks yuan-denominated A shares listed on China's two exchanges, climbed 378.18 to 4,950.12 at the 3 p.m. close, the biggest fluctuation among indexes included in global benchmarks. All of the measure's 300 members rose, apart from 15 that were suspended or unchanged.
``We are probably already at a level where the regulators don't want to see a further decline in stocks,'' said Fan Dizhao, who helps manage the equivalent of $8.3 billion at Guotai Asset Management Co. in Shanghai.
Aluminum Corp. of China, the nation's biggest maker of the lightweight metal and also called Chalco, jumped 2.94 yuan, or by the 10 percent daily cap, to 32.34. The company's parent, known as Chinalco, and Alcoa Inc. bought an estimated 9 percent stake in Rio Tinto.
China Shenhua Energy Co. gained after a newspaper said its parent plans to buy a stake in Fortescue Metals Group Ltd.
An index of raw-materials producers rallied 8.9 percent for the biggest advance among 10 industries in the CSI 300 Index. Hunan Valin Steel Tube & Wire Co. gained 10 percent to 12.60 yuan, rebounding from a 16 percent slide last week after the Chinese steelmaker said power shortages had disrupted production.
Easing Storms
More than three weeks of snow in central and southern China brought transport networks to a standstill, killed at least 60 people and caused economic losses of at least 53.8 billion yuan ($7.5 billion). Snow and freezing rains in southern and eastern China are forecast to give way to clearer weather before the Chinese New Year begins in three days, the China Meteorological Administration said.
The storms have led several companies to warn profits may drop, prompting speculation authorities would act to boost growth. Stocks had more than doubled last year before the impact of six interest rate increases and a clampdown on bank lending.
Brokerages Advance
Citic Securities climbed 5.72 yuan, or 8.3 percent, to 75.03, its biggest gain since Nov. 2. The stock plunged 24 percent last month, compared with a 14 percent decline on the benchmark index. Haitong Securities Co., the nation's second- biggest publicly traded brokerage, surged 3.64 yuan, or 8.1 percent, to 48.65, its steepest advance since Oct. 24.
China's stock regulator approved two new stock funds, ending a five-month freeze, the Shanghai Securities News reported on Feb. 2. CCB Principal Asset Management Co. and China Southern Fund Management Co. will start closed-end funds, raising as much as 14 billion yuan ($1.95 billion), the newspaper said.
CCB Principal received approval to offer a 6-billion yuan fund, Beijing-based spokeswoman Ruan Yi said in a phone interview today. The regulator hasn't set a date for fundraising to begin, she said. China Southern Fund Management Co. also won approval to offer an 8-billion yuan fund, said Zeng Yihan, the firm's Shenzhen-based spokeswoman. Sales will begin after this week's Lunar New Holidays, Zeng said.
Shanghai Pudong Development Bank Co. and China Vanke Co. surged after the government said developers could borrow more to building cheap housing. Air China Ltd. and China Southern Airlines Co. rose after Citigroup Inc. said earnings at airlines likely climbed last year.
The following stocks rose or fell and the stock symbols are in brackets after companies' names.
Pudong Bank (600000 CH), the Chinese partner of Citigroup Inc., jumped 4.72 yuan, or by the 10 percent daily permitted limit, to 51.95. Vanke (000002 CH), the country's largest publicly traded developer, added 2.03 yuan, or 7.5 percent, to 29.03.
Developers of cheap housing will now have access to loans from a wider range of lenders, be required to put less of their own funds into projects and be eligible for discounted interest rates, the banking regulator and People's Bank of China said in a joint statement on their Web sites today.
China Merchants Bank Co. (600036 CH), the nation's biggest dual-currency credit-card issuer, advanced 3.12 yuan, or 9.4 percent, to 36.28.
Shenhua Energy (601088 CH), the nation's largest coal producer, advanced 4.89 yuan, or 8.6 percent, to 61.61. Parent Shenhua Group Corp. and China Investment Corp., which manages $200 billion in sovereign funds, are in talks to buy a 15.85 percent stake in Perth-based Fortescue from Harbinger Capital Partners, the South China Morning Post reported.
Fortescue has been in talks with potential investors, Executive Director of Operations Graeme Rowley said by phone from Perth, without naming the parties.
Coal stocks also rose after thermal coal prices at Australia's Newcastle port surged past $100 a metric ton for the first time, rising 25 percent to $116.44 in the week ended Feb. 1, according to the globalCOAL NEWC Index.
China Coal Energy Co. (601898 CH), the nation's second- largest coal producer, surged 2.22 yuan, or the 10 percent daily limit, to 24.42. Yanzhou Coal Mining Co., the listed unit of China's fourth-biggest coal miner, climbed 1.84 yuan, or 10 percent, to 20.20.
Air China (601111 CH), the world's biggest airline by market value, climbed 2.04 yuan, or 10 percent, to 22.45. China Southern (600029 CH), the nation's biggest carrier by fleet size, gained 1.98 yuan, or 10 percent, to 21.79.
Airlines in China likely boosted earnings last year due to demand for air travel and better-than-expected pricing ability, Ally Ma, a Citigroup analyst wrote in a report today. The carriers may also be shielded from a possible recession in the U.S. because of their domestic focus, Ma wrote.
South African, Australian Coal Climb to Records on Supply Curbs
By Angela Macdonald-Smith and Alistair Holloway
Feb. 4 (Bloomberg) -- Coal jumped to records at South Africa's Richards Bay and Australia's Newcastle port as production was curbed by power cuts and flooding, while snowstorms disrupted mining and transportation in China.
Coal at Richards Bay rose $12.20, or 12 percent, to $111.30 a metric ton, according to McCloskey Group Ltd. figures. Power- plant coal prices at the New South Wales port in Australia climbed $23.09, or 25 percent, to $116.44 a ton in the week ended Feb. 1, according to the globalCOAL NEWC Index.
``It is another indicator of tightness'' in supply of the fuel, Andrew Wells, an assistant editor at the Petersfield, England-based McCloskey, said by phone today.
The rising prices helped drive up coal producers' shares.
Centennial Coal Co., Australia's second-largest coal company by sales, gained 2.7 percent in Sydney trading and Gloucester Coal advanced 2.5 percent. China Shenhua Energy Co., the world's second-largest coal company, climbed as much as 5.5 percent in Hong Kong trading. U.K. Coal Plc rose as much as 2.2 percent in London.
Power shortages in South Africa forced Anglo American Plc to close mines last month.
Eskom Holdings Ltd., the nation's state-run power utility, is unable to meet demand after the government delayed a decision to expand generating capacity. Today it began cutting 1,500 megawatts of electricity to towns and cities and may have to reduce the supply by as much as 3,000 megawatts.
Supply Needed
Eskom needs 5.4 million metric tons of additional coal in the next three months to restore stockpiles to 20 days of consumption.
In Australia, BHP Billiton Mitsubishi Alliance is among mining companies that say they may miss deliveries after heavier-than-usual rain flooded pits in the world's biggest coal-exporting country.
Melbourne-based BHP Billiton Ltd., the world's biggest miner, said operations at its alliance with Mitsubishi Corp. may be affected for as long as six months.
The disruptions, in Queensland, are mostly affecting the now ``unbelievably tight'' metallurgical coal market, pushing up spot prices to about $200 or $210 a ton, Graham Wailes, a coal analyst at AME Mineral Economics Pty, said in Sydney.
China, the world's largest producer and consumer of coal, will halt exports until April after the worst snowstorms in 50 years.
China Snows
More than three weeks of snow in central and southern China have brought transport networks to a standstill, killed at least 60 people and caused economic losses of at least 53.8 billion yuan ($7.5 billion). The country, reliant on coal for 78 percent of its power, is restricting exports to boost domestic supplies.
Indonesia may be unable to increase production of thermal coal sufficiently to compensate for shortages of supply elsewhere in Asia, as it has in the past, Wailes said.
``I just don't think the supply solution is readily available and that's probably why you've had these huge increases,'' he said.
GlobalCOAL's monthly index for Newcastle thermal coal prices rose $1.71, or 1.9 percent, to $90.87 a ton in January, the fourth successive monthly record. Newcastle is the world's biggest coal-export harbor.
The increase will influence negotiations scheduled to begin between suppliers and buyers on contract coal prices.
JPMorgan, UBS
UBS AG, Europe's biggest bank by assets, on Feb. 1 raised its forecasts for thermal coal contract prices for 2008 and 2009, citing the coal ``crisis'' in China and disruptions in Australia. Prices may reach $100 a ton this year and $125 in 2009, from previous estimates of $90 and $110, the bank said.
JPMorgan on Jan. 29 said it raised its estimate for 2008 contract prices for power-station coal to $90 a ton, from $70.
It boosted forecasts of 2008 prices for coal used in steelmaking to $140 a ton, from $120. Those for thermal coal are $55.65 a ton for the year that started April 1, while coking coal contract prices are $98.38, JPMorgan said.
In Europe, thermal coal for delivery to Amsterdam, Rotterdam or Antwerp with settlement in the third quarter advanced 25 cents, or 0.2 percent, to $127.50 a ton as of 12:27 p.m. in London, ICAP prices showed.
China's march on resources continues with four new foreign deals
David Robertson
Any doubt that the first shots in a new economic war have been fired were removed yesterday as Chinese companies announced four deals in the resources sector.
The deals came only two days after Chinalco, the state-owned aluminium company, took a 12 per cent stake in Rio Tinto - the largest share acquisition by the Chinese in a foreign company.
China's rush for resources comes as the Government seeks access to the metals, minerals and energy needed to feed its rapidly growing economy.
The moves announced yesterday with first-tier companies such as Anglo American and RusAl confirm that the Chinese have stepped up their attempts to gain control of foreign resource assets. Among the deals announced was a far-reaching strategic partnership between Anglo and the China Development Bank to “develop projects in China, Africa and elsewhere”.
Anglo did not put a value on the arrangement but it will give it access to Chinese funds to build new, multibillion-dollar mines.
RusAl, the Russian aluminium company, signed an agreement with the China Power Investment Corporation (CPIC) to create a giant metals partnership spanning Africa and China. Soco International, a British-listed oil company, sold a Yemeni oilfield to Sinochem Petroleum for $465million (£235million). Fortescue Metals, an Australian iron ore producer, said that it was in talks with suitors, thought to be China Shenua Energy and the China Investment Corporation.
The almost simultaneous announcement of the partnerships was a coincidence, but they have highlighted, nevertheless, China's growing presence in the resources sector, particularly coming so soon after the Chinalco-Rio Tinto share acquisition.
China is forecast to consume more than half of all the world's key resources within the next decade and the country is seeking to control mines and oilfields to ensure its supplies.
China is already the world's largest consumer of every big resource except oil and accounts for 47 per cent of all iron ore, 32per cent of aluminium and 25 per cent of copper.
What Would Buffett Buy?
S&P's latest screen tracking the Berkshire bigwig's investing criteria uncovers 60 attractive names
by David Braverman
Warren Buffett has made his reputation as the World's Greatest Investor by taking the longer view—buying quality stocks with good earnings power and hanging on through bull and bear markets. During the past few decades, he has parlayed some well-chosen core holdings into an unparalleled record, not to mention an enormous personal fortune.
The stock of Buffett's company, Berkshire Hathaway (BRKA), topped the broader market in 2007 and 2006 after underperforming for a few years. Longtime Berkshire holders are sitting on impressive gains. Berkshire's book value per share has grown at a compounded annual rate of more than 20% over the past 40 calendar years. If you had invested $10,000 in Berkshire in January, 1968 (the shares closed at $20.50 on the last trading day of that month), your holding would be worth more than $50 million today.
How does he do it? Author Robert Hagstrom tried to compile Buffett's key investing strategies in his 1994 best seller, The Warren Buffett Way: Investment Strategies of the World's Greatest Investor. With Hagstrom's book as a source, Standard & Poor's Portfolio Services analyst David Braverman put together a stock screen that picks companies using criteria similar to those that fit the legendary investor's growth-oriented style. S&P updates this screen on a semiannual basis, during February and again in August.
How the Screen Works
Over the years, the screen has put in a pretty good performance itself. From Feb. 13, 1995, through Jan. 17, 2008, the screen had an annualized return of 14.9%, vs. 8.2% for the S&P 500. In 2007, the screen stocks gained 15.7%, vs. 3.5% for the S&P 500. (All results reflect price appreciation only.)
It should be noted that these are not necessarily stocks that Buffett has bought or personally plans to buy. The list reflects only the criteria that Buffett has emphasized in the past.
Each time the screen is run, the stocks that were previously returned are "sold," and the new stocks are "purchased." There is 100% turnover each time the stock screen is run. The full criteria for this screen:
1. Owner earnings (cash flow less capital expenditures) above $50 million (changed in February, 2006, from $20 million)
2. Net margins of at least 15% for the trailing 12 months
3. Return on equity of at least 15% the previous quarter and in every year for the last three years
4. Retained earnings that have grown less than the market capitalization, on an absolute basis, in the last five years
5. Looking five years into the future, projected cash flow per share greater than the current market price for each stock (discounted to the present using the 30-year Treasury yield); this helps remove overpriced stocks from the list
6. Market capitalization of $500 million or more
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