Report archive
22 March 2012
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Political intrigue Part IIThe Big Call
Car sales shift up a gear
In spite of the rising price of petrol, we think that sales of cars are set to edge upward from a weak January/February period as discounts draw buyers.
Consumer China
Online video: turning eyeballs into profit
Youku’s proposed $1bn stock deal for rival Tudou highlights the enormous potential of China’s online video sector, yet competition remains fierce and profitability elusive.
Leshi – refinancing required for copyright king
Copyright distribution has driven strong top-line growth for the innovative ChiNext-listed company, but soaring debt levels could become unsustainable unless refinancing is sought.
Ku6 – gambling all on user-generated content
Switch to user-generated content platform lead to Ku6’s first gross profit in 4Q11.
Youku – Tudou merger unlikely to stem losses
Youku’s proposed merger with Tudou will create one of the largest website operators in China, but synergies are limited and profitability is likely to remain elusive.
Rural China
Rural e-commerce: a prairie fire
Booming e-commerce businesses are the latest structural shift behind China’s rural take-off.
China’s rural boom rebounds
The China Confidential Rural Wealth Index (CCRWI), which measures key aspects of rural economic activity to ascertain the pace of wealth creation, rebounded to 56.3 in February from 51.0 in January boosted by an increase in rural vehicle sales and rebounding tractor sales.
Financial China
Green light for local government debt rollover
Regulators have finally given the go-ahead for banks to roll some local government debt due to mature this year, while also encouraging local government financing vehicles to use a variety of financing tools to raise additional funds, transferring some of the eventual default risk from banks to investors
Selected financial charts
A selection of key financial data for March.
Capital Intensive China
Financing demands raise questions over some developers
Summary: A bond issue in mid-March in Singapore by KWG (1813:HKG), a mainland property developer, has raised concerns over the financial health of weaker companies in the sector. KWG had to offer a coupon of 13.25% to attract buyers to the $400m issue maturing in 2017, a sign that investors took as signalling that some Chinese developers are willing to pay handsomely for funding offshore because little is available at home. KWG was not alone in sparking concern; RenHe was downgraded one not to B+ by S&P earlier this month amid concerns over the developer’s cash flow. Agile (3383:HKG) issued $700m in bonds maturing 2017 at a coupon of 9.875%, another indication of investor wariness.
Best of Chinese Commentators
Wen reiterates property tightening intent
Property prices in almost two-thirds of major Chinese cities slid for the fifth consecutive month in February, according to figures released by the National Bureau of Statistics (NBS) on March 18. Meanwhile, in his annual address to the National People’s Congress earlier this month, Premier Wen Jiabao stressed that the government would not relax its home purchase restrictions, as house prices remain too high. Domestic commentators have been attempting to divine where the market is heading.
Rare earth export dispute
On March 13, the US, Japan and the European Union filed a legal challenge with the World Trade Organisation against China’s continued imposition of a quota on rare earth exports, in the latest escalation of a long-standing trade dispute.
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RENMINBI COMPASS
Renminbi Compass, a new research service launched by the FT, aims to act as a navigational guide through the expanding universe of renminbi asset classes. With the Chinese currency gaining ever-wider acceptance around the world and Beijing taking steps to open its capital account, we are broadening our research coverage to include not only equity funds but also all other important renminbi asset classes, such as chengtou bonds, dim sum bonds, real estate, trust products, underground banking, art, antiques and several others.
