Banco Santander, Europe’s second largest lender is planning a joint venture with China Construction Bank (CCB). The story grabbed CSA’s attention because the JV is not targeting China’s urban centers, but instead China’s rural farming villages.
According to this China Daily article, the JV will begin with a registered capital pool of about 3 billion yuan ($438 million), and could rise to a whoppin’ 5 billion yuan ($730 million) within 3 years. CCB will invest 1.8 billion yuan and hold a 60% stake, while Santander will hold the balance.
This pool of capital will then be allocated to 100 village banks which will hold a 51% stake in of the new entities, each of which will have a minimum of 1 million yuan in registered capital.
Village banks are financial institutions set up primarily for farmers and should have a registered capital of at least 1 million yuan. They can accept deposits and also conduct lending activities.
The CCB proposal, which would create the first financial holding company in the country, and a new model to develop rural finance, is yet to be approved by the State Council, according to the sources.
“The model could help to create a unified plan to develop China’s rural financial services network. It would also help to introduce foreign banks’ advanced experience in rural financing,” the sources said.
Banco Santander already has a strong presence in rural lending, both in Europe with its subsidiary Banesto Bank, and also in Latin America where the bank has made tremendous inroad in the past decade.
Currently foreign banks are only permitted to hold a maximum 20% stake in Chinese financial institutions located in urban centers. This criteria however does not apply for village banks in the country side.
CSA believes this is a good strategy for the Spanish banking conglomerate to expand into new markets which remain relatively untapped… especially by foreign entities. Rural China is a huge market with more than 230 million farming households which desperately need financing to develop and support their farming.
China may have little choice but to pay more for iron ore, due to growing demand and the country’s dependence on overseas supplies, says James Campbell, commodities reporter at Dow Jones. He also discusses the tug of war between Chinese steel mills and big miners over pricing, with CNBC’s Sri Jegarajah and Martin Soong.
It seems the latest buzz is how Shanghai is set to challenge Hong Kong’s status as the world’s IPO “fund-raising king.” CNBC, Bloomberg, China Daily, Reuters, etc are all talking about it. CSA asks, is this a legitimate claim?
It is difficult to argue with the numbers. According to this article, HK is expected to raise about $47.7 billion this year in 2010, while Shanghai is predicted will attract about $55.7 billion.
The key question to ask is, who is raising this money? Hong Kong has the institutions, history and legal framework for international company’s to list on its bourse, while Shanghai does not. In other words, the mainland may attract more money in IPO’s, but the money is going to be raised primarily by mainland company’s–specifically ones state owned entities.
Shanghai is preparing a international board which will allow foreign company’s to list on the mainland but, when this will come online is anybody’s guess. Shanghai still lacks a developed insurance market, many private company’s on the mainland fear listing because of the potential of being forced to pay higher taxes after they make their accounting public / transparent, margin trading and short-selling is limited, the bond market is small, and stock market futures were only introduced today (see this Bloomberg article).
Nonetheless, there are company’s working on getting access to Shanghai. The China Daily reports the first company’s which are hoping to list on the mainland’s A-share market are HSBC and the global exchange group NYSE-Euronext. HSBC, is essentially the main player in HK’s HengSeng inde, while NYSE-Euronext represent the investors vehicle for investing in shares of the New York Stock Exchange its its European Counterpart. Once again CSA asks, “where do regular company’s from abroad fit into this context?
In this article from the China Daily, Terence Ho, a analyst with Ernst & Young explains “Currently, the two places have different roles. Hong Kong caters to millions of international investors while Shanghai mainly targets domestic investors. In the short term, Shanghai is unlikely catch up with Hong Kong in terms of international exposure and liquidity.”
CSA is inclined to agree with Mr. Ho, the two markets do have different roles at the moment. As hungry as company’s around the world are tap mainland capital, China would rather have both financial centers fill different niches at the moment.
Shanghai will only come to dominate the Hong Kong’s IPO market once its financial services expand and it develops the framework for facilitating the listing of international company’s on the mainland.
The Latin Business Chronicle published a story today which technically, was supposed to focus on the growth of Colombia’s stock exchange and explain why it was the regions best performer last year.
In addition to Colombia, the article also shares data complied by Economatica on the growth of the other major stock exchanges in the region, which is what CSA will be sharing with you today. To read the full article from the Latin Business Chronicle click here.
Colombia – Best performer in Latam last year, IGBC (Colombia’s benchmark) stock index has grown in value by 927.9% during the past 10 years, and average decline in value of transactions in 2008 was 2.3%—lower than all other countries in the region
Brazil – Latin America’s largest stock market, Ibovespa (Brazil’s benchmark) stock index has grown 301.3% during the past 10 years, and the average decline of transitions in 2008 compared with 2009 was 13.6%.
Mexico – IPC (major benchmark index in Mexico) has grown 250.5% during the past 10 years, and the average decline in transactions last year was 13.9%
Venezuela – The Caracas stock index has grown by 916.5% during the past 10 years, and the average decline in transactions was 29.5% last year—the second worst in Latin America.
Argentina – The Merval inces has grown by 321.3% during the past ten years, and had the worst average decline in transactions last year, suffering a decline of 54.4%.
Peru – The Lima stock index (IGBVL) has been one of the regions best performing in the past few years. Seeing growth of 671.1% during the past 10 years, and a decline in average transactions last year of 21%.
Chile – Last but not least, Chile’s IPSA index has grown by 218.8% over the past 10 years, and the average decline in transactions last year was a mere 3.6%-second best next to Colombia.
China-ASEAN Free Trade Agreement came into effect at the start of the new year. CCTV9 reports:
Markets soured higher across the world today, Monday Jan 4, 2010… mostly on news of China’s manufacturing data, which was better than expected. This CNBC video provides a few perspectives that are not quite as bullish and offers some good insight if you’re a China investor.
Don’t adopt a ‘buy and hold’ strategy when investing in China, advises Chi Lo, head of overseas investment at Ping An of China Asset Mgmt.
China’s second FTA with a Latin American nation will become active this February 2010. A mile stone for both country’s, the agreement seeks to boost bilateral trade to new levels.
Here are the basic facts and forecasts, provided via this article from Nasdaq.com. For the record, author Sophie Kevany, is a superb journalist who is actually based in Peru. This article does not do justice to her credo of true investigative journalism I have read in the past, but no less is always a good source for all that is Peruvian finance.
Check out her other articles on the WSJ, Decanter (yes she even writes about Peruvian wines and spirits), and well, just google her name and you’ll be greeted with a swarm of informative pieces about Peru and the greater South American region.
LIMA -(Dow Jones)- Peru’s free trade agreement with China is set to come into force early February, and it is expected to boost total trade values to an estimated $8 billion in its first year.
The treaty was ratified earlier this month by a supreme government decree, meaning Peru’s congress will not vote on it, state newspaper El Peruano said Wednesday.
The treaty excludes so called “sensitive products” such as textiles, shoes and clothing, Peru’s Vice Minister for Trade and Tourism, Eduardo Ferreyros, told El Peruano.
Trade between the two countries is expected to total about $5.5 billion in 2009. Of that, exports to China from Peru are expected to reach $3 billion, Ferreyros told state news agency Andina, while imports from China should total about $2.5 billion.
-By Sophie Kevany, Dow Jones Newswires; 51-198-903-8043; sophie.kevany@ dowjones.com
A private Guangdong based firm by the name of Rixin Development, has reached an agreement to buy a majority stack in the ownership of a Chilean iron ore mine.
Rixin Development will acquire a 70% stake in the Chilean property. Such a deal shows the power of China’s up and coming company’s. For starters, Rixin Development is listed only on a local provincial enterprise information website, sdwin.com. The company does not have its own home page. Officially it is a “trader for home appliances, textiles, auto parts and so on, and importer and exporter of various products and technologies.” However, I wish any readers the best of luck if they undertake the challenge to find any further information from a official company medium.
If you follow Alibaba.com’s 101 on how to avoid being scammed in China, such a deal should probably send alarm bells off. Perhaps in the post, economic-recession world of 2010, the traditional elements which define a professional entity are no longer necessary. Especially when your a developing Latin American country hungry for investment… or a private investor in China, STARVING for investment opportunities in a very over-saturated market with little options on where to park your capital and have it grow at the same time. It is clear, the deal is going through and that the company is legitimate.
Li Zihao, president of Rixin was recently quotes saying, “privately-owned companies are in a better position to invest in overseas natural resources.” Time will tell if this is actually true, or if the central government is content with allowing such a dynamic to emerge.
Read a more comprehensive article on the facts (which are known) surrounding this deal via this article over at ChinaMining.org.
China plans to unveil its first index futures as early as this March 2010. Bloomberg reports in this article:
The State Council, China’s cabinet, has given the China Securities Regulatory Commission approval “in principle” to introduce index futures, said the person, who declined to be identified before an announcement. The first contract, based on China’s CSI 300 Index, may begin trading after the Communist party’s annual congress in March, the official said.
Index futures would give investors in China a mechanism to profit from declines in prices for the first time, allowing them to hedge risks. That may help ease fluctuations in a market in which the stock benchmark almost doubled in 2007, slumped 65 percent in 2008 and rebounded 80 percent last year.
“For institutional investors, having stock index futures is important,” said Tony Wu, Shanghai-based portfolio manager at Martin Currie Investment Management, which oversees $4 billion in Greater China. “There will be some tools we can use to hedge risks.”
Click this link to read the complete article at Bloomberg.com
