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Market Watch
Business> Market Watch
UPDATED: August 27, 2010 NO. 35 SEPTEMBER 2, 2010

HIGHEST DAM: The world's highest arch dam at Xiaowan Hydropower Station in southwest China's Yunnan Province is under construction. The station's No.4 power generation unit, with a capacity of 700, 000 kw, began operation on August 25, bringing China's total hydropower generation capacity to more than 200 million kw (CHEN HAINING)

Numbers of the Week

206.4 billion

Net profits of 1,191 listed companies, which disclosed their performance for the first half of the year as of August 22, increased 58.5 percent year on year to reach 206.4 billion yuan ($30.4 billion).


China's gold output rose 8.69 percent from a year ago to 159.24 tons in the first half of this year, said the Ministry of Industry and Information Technology.


TO THE POINT: Chinese fund management companies spilled red ink in the first half of 2010 as the stock market turned bearish. The shipbuilding industry regains its lost ground but unsteady seas could capsize hopes for continued success. Chinese property developers' financing woes are intensifying. China Mobile reported modest growth in first-half profits as competition heats up among the telecom giants. Outbound M&A deals, especially those involving natural resources, by Chinese companies in the first half of this year hit a record high. China aims to lift its installed hydropower capacity to 300 million kilowatts by 2015 from the current 200 million kilowatts.


Funds' Gloom

With the stock market stuck in the doldrums, Chinese investors are losing their gains, with no exception for fund management companies.

A report by Tianxiang Investment Consulting Co. Ltd. says 234 funds operated by the country's 18 fund management companies racked up painful losses totaling 154.83 billion yuan ($22.8 billion) in the first half of this year.

The biggest losers were the 93 stock funds that reported a combined loss of 99.4 billion yuan ($14.6 billion) from January to June. The Shanghai Composite Index plunged more than 26 percent in the first six months of 2010.

The bear market was awakened from its slumber as investor worries abounded that more aggressive tightening macroeconomic policies were on the way, said Zhang Xin, a senior analyst with the China Galaxy Securities Co. Ltd.

Looking ahead, fund managers are divided on where the stock market is heading. The rebound in corporate profits will make stock valuations more attractive and provide a stabilizing force to the volatile market, said Pang Jiang, a fund manager with Franklin Templeton Sealand Fund Management Co. Ltd.

But Zou Wei, a fund manager at Harvest Fund Management Co. Ltd., disagreed. "Uncertainties are gathering over the market prospect, including the economic slowdown and the European sovereign debt crisis," he said.

Shipbuilders Roar

Two years after the financial crisis, China's shipbuilding industry is ready to set sail again.

Chinese shipbuilders received new orders of 9.54 million deadweight tons in July, hitting a record high since the financial crisis, said the China Association of the National Shipbuilding Industry. The figure brought the amount in the first seven months to 33.3 million deadweight tons, 4.2 times the same period last year.

When the overwhelming financial storm swept the globe in 2008, Chinese ship makers sourcing their orders largely from the United States and Europe had nowhere to hide. Many buyers postponed deliveries or cancelled them outright since they have no cargo to transport.

In response, the government has handed out an array of generous incentives to help the hard-hit industry, such as easier access to financing. Moreover, it has encouraged qualified shipbuilders to float their shares on domestic stock markets.

But some analysts see murky waters for the shipbuilding boom. The rebound in new orders may not be a result of recovering demands, but just low ship prices, said Bao Zhangjing, a researcher of the China Shipbuilding Industry Research Center.

A bulk cargo vessel of around 76,000 deadweight tons cost around 500 million yuan ($73.5 million) in 2008, but the price has dived to around 260 million yuan ($38.2 million) this year, says Ningbo Fonwa Shipping Co. Ltd.

In addition, most of the new orders went to a few big manufacturers, which means challenges remain for the smaller companies, said Bao.

Property Dilemma

With financial distress lingering, Chinese property developers are facing some serious headwinds.

By August 15, 40 listed real estate developers had released their first-half financial reports, reporting a dizzying average debt-to-asset ratio of 61.13 percent, say financial data provider Shanghai Wind Information Co. Ltd.

Policymakers have stepped up a stringent clampdown on bank financing to developers as part of its efforts to let air out of the housing bubble.

The financial woes remain bearable for most property developers, but the situation might worsen if their sales volume continues to plunge, said Gu Yunchang, Deputy Director of the China Real Estate and Housing Research Association.

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