China Economic Scan Weekly Stockmarket Review

Chinese stocks finished the week mixed versus last Friday’s close.Mainland stocks rose slightly with the Shanghai Composite up 0.75% at2,645.26 and the Shenzhen Component up 0.89% at 10,273.23, while theHang Seng closed down –3.45% week on week to 16,790.70, and the TAIEXdown -1.44% to 6,489.09.

Chinese stocks finished the week mixed versus last Friday’s close. Mainland stocks rose slightly with the Shanghai Composite up 0.75% at 2,645.26 and the Shenzhen Component up 0.89% at 10,273.23, while the Hang Seng closed down –3.45% week on week to 16,790.70, and the TAIEX down -1.44% to 6,489.09.

During the week there were a range of interesting developments, Hong Kong Exchanges & Clearing said net income dropped 49% to HK$834.2 million ($108 million) in the 3 months ended March 31, after the global recession caused trading to decline. The average daily value of securities traded on the exchange slumped 55% to HK$44.7 billion from a year earlier.

Keeping with the Hong Kong exchange, China Resources Power Holdings, a Chinese electricity producer, was named to replace Yue Yuen Industrial Holdings in the Hang Seng Index. Hang Seng Indexes Co also said in its quarterly review that HSBC would be capped at a weighting of 15% from the current 20%. The changes to the 42 constituent index will be enacted from 8 June 2009.

In resources, China National Offshore Oil Corp (CNOOC) signed an agreement with UK-based BG Group involving a liquefied natural gas (LNG) development project in Queensland, Australia. Under the agreement, CNOOC would buy 3.6 million tons per annum (mtpa) of LNG for 20 years. The project would come on line in 2014 with two liquefaction trains providing 7.4 mtpa capacity.

China CITIC Bank said it would buy a 70.32% stake in investment holding company CITIC International Financial Holdings for HK$13.6 billion (US$1.75 billion). The acquisition will let CITIC Bank expand its branch network to other international finance centers and establish a stronger presence in Hong Kong. CITIC Bank said the unaudited net asset value of CITIC International Financial Holdings was about HK$9.5 billion at the end of 2008.

Also CITIC-Prudential Life Insurance, a joint venture (JV) equally owned by China’s state-owed CITIC Group and Prudential Plc of Britain, said it intends to launch an A-share listing in 2012. CITIC-Prudential has been posting losses since its establishment in October 2000. As of the end of 2008, it registered a net loss of about RMB 200 million.

On the international front, China and Britain agreed on Monday to prioritize opening China’s stock markets to foreign companies and to arrange for more Chinese firms to list on London exchanges, in negotiations said to be largely driven by HSBC. As yet no timetable has been set, however there was talk of aiming to get Chinese companies listed in London as early as in the next few months.

Jien Nickel, one of China’s leading nickel producers, said in a filing to the Shanghai Stock Exchange that it is now the largest shareholder of Australia’s Metallica Minerals, after buying 19.95% of the company with A$5.16 million ($3.93 million). The company bought 22.85 million shares of the Metallica Minerals at a price of A$0.2259 per share.

Anshan Iron and Steel Group (Ansteel) received approval to increase its stake in Australian iron miner Gindalbie Metals up to a new cap of 36.28%. Ansteel is also a 50% JV partner with Gindalbie to develop the A$1.8 billion Karara Iron Ore Project.

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