Top news of the week
Chinese money managers to invest in overseas markets again after a
15-month break
Top fund manager E-Fund recently received a $1 billion foreign currency quota from the State Administration of Foreign Exchange, which indicated that the temporary freeze on overseas investing is being lifted. The implicit freeze was put in place last autumn as global stock markets took a nosedive during the financial crisis.
While E-Fund is one of a dozen Chinese Qualified Domestic Institutional Investors (QDIIs) approved by the securities regulator to invest in overseas markets, its investment plans are subject to a second review by the foreign currency regulator, which helps to enforce control over the flow of capital in and out of the country. E-Fund is expected to deploy a big chunk of the capital to invest in Chinese growth companies listed on overseas stock exchanges.
The first batch of four Chinese QDIIs waded into the global stock market in October 2007, but their timing could not have been worse, as they invested near the peak of the market. The second batch, which entered the global market in mid-2008, did slightly better, but they were unable to escape the global market plunge last fall. As a result, these QDII products were largely shunned by Chinese investors. However, interest seems to have recovered in recent months as the rebound in overseas markets has helped these QDIIs to deliver better performance this year. Although the returns of QDII funds so far still pale in comparison with the A-share funds, a growing number of investors now view QDII funds as an important investment tool to diversify risk and to benefit from the growth of major Chinese companies not listed on the domestic stock market.
Market recap
After concerns about massive capital needs from the Chinese banks
triggered sharp declines last week, the stock market rebounded this
week, as clarification from the banking regulators helped restore
investor confidence. The Shanghai Composite Index climbed 7.1% to end at
3,317 points on Friday, while the Shenzhen Composite Index increased
7.8% to 13,885, a yearly high for 2009.
Macro and industry updates
"Made in China" commercials aired on CNN to boost image of Chinese
goods
The 30-second commercial, with the tagline of "Made in China: Made with the World," recently appeared on four channels at CNN and will run for about six weeks. Instead of promoting specific Chinese brands, the commercial features products such as sports shoes, electronics, clothing, and airplanes, to showcase the quality and innovation of Chinese goods and to emphasize that these goods are made in collaboration with partners throughout the world. The commercial, jointly sponsored by four industry associations in China, is the first major brand-building effort for Chinese products.
Asian Development Bank issued CNY-denominated 10-year bonds
The bank issued CNY 1 billion-worth of such bonds, also called panda bonds, to raise capital for clean energy projects in China. According to media reports, about half of the bonds were sold to Chinese banks, about 35% to insurance firms, and the rest to foreign banks. Asian Development Bank was the first to tap the Chinese market by issuing the CNY-denominated bond in 2005.
Retail sales to reach CNY 12.5 trillion in 2009
This represents a 15.6% year-over-year increase, according to the Ministry of Commerce. The ministry estimates that consumer spending on online purchases should double this year to reach CNY 260 billion.
Morgan Stanley puts its 34% stake in CICC up for sale
China International Capital Corporation (CICC) was established in 1996 as a joint venture between Morgan Stanley and China Construction Bank. As the first and most highly regarded investment bank in China, CICC participated in underwriting almost all mega-IPOs of major state-owned companies in the past decade. Although Morgan Stanley has remained a passive investor in CICC for years, the firm is required to dispose of its stake in CICC before it can form a new joint venture with a Shanghai-based local securities firm to tap into IPO underwriting and stock brokerage in China's domestic A-share market. Rumoured bidders for the CICC stake include US private equity firms such as Carlyle and Bain Capital, as well as Fubon, a major Taiwanese financial conglomerate.
