Must read article about Sino-Latin American relations

A must read article for anyone interested in Sino-Latin American relations was published today on SeekingAlpha’s website.  It is written by Erik Bethel, one of the four founders and CEO of Sino-Latin Capital.  I highly recommend it to anyone even mildly interested in the growth of Sino-Latin American relations.

Click here to access the full article direct from SeekingAlpha.

Travel to any country in Latin America and you will see the visible hand of China at work: a computer manufacturing plant in Mexico, a copper mine in Peru, a football stadium in Costa Rica. In the year 2007, the thought of China in Latin America would have appeared, at best, improbable. But in a three-year stretch, China signed free trade agreements with Chile, Peru and Costa Rica, inked billions of dollars worth of deals in oil and mining projects throughout the region, and supplanted the US as Brazil’s biggest trading partner. Once almost unseen in Latin America, China’s bilateral trade has risen from $12bn in 2000 to well over $150bn today.

Given the importance of its new Asian friend, Latin Americans are rolling out the red carpets to Chinese business delegations and jumping on planes not only to Beijing but also to Shanghai, Shenzhen, and Tianjin.

Rationale Behind Chinese Investments in Latin America [...]

Please visit SeekingAlpha to read the full article

China to create $5 billion fund to invest in Latin America

In line with China’s outbound investment strategies in Africa and Asia, China is now planning to create a $5 billion usd investment fund for Latin American investments.

The funds target investments will include, infrastructure (probably to help the Chinese get commodities out), agriculture, mining and energy.

Read more in Spanish from Argentinean DERF Agencia de Noticias.

Interactive map of China’s overseas investments

Click here to view the map, courtesy of Forbes

Since 2005 Chinese firms and arms of the Chinese government have invested hundreds of billions of dollars in foreign companies and raw materials. Each dot on this map tracks one of those investments, with larger dots representing…

Shanghai to Challenge HK on IPO’s

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.

When everyone’s bullish on China… be careful

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 private sector ventures into Latin America

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 to introduce index futures

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

China’s Africa goals more than just natural resources – Reuters

~ Gavin Coates

BEIJING (Reuters) – Barely a month goes by without some new energy or mineral deal being struck between China and an African nation. These deals have transfixed the West, but China gets far more from the relationship than raw resources.

Africa offers China two important things — a chance to earn the global respect it believes it deserves in recognition of its growing economic clout, and friends who do not judge it, or who at least have little reason to directly fear China’s rise.

China’s friendly relations with Africa go back decades, to when Beijing backed newly independent states as well as liberation movements. The continent’s backing was vital in getting China into the United Nations in 1971.

“You could argue that the contemporary driver is economic, but they’ve always had a political interest in Africa, from the mid-1950s onward,” said Chris Alden, an Africa expert at the London School of Economics.

“As China becomes a more active player in multilateral affairs, it recognizes it needs partners, and Africa in many ways is a very suitable partner.”

In 2006, President Hu Jintao promised a leap in investment, trade and aid at Beijing’s first summit with African leaders. At the G20 summit of big developed and developing economies last November, he raised Africa’s needs during the global economic turmoil.

Click here to read the complete article written by Reuters reporter Ben Blanchard

China’s seemingly unending quest for resources continues

Sinopec Corp. announced today that it expects to incorporate parts of its overseas assets from its parent company Sinopec Group into its listed listed company in China.

Wang Xinhua, chief financial officer (CFO) of the oil firm  said “the good overseas assets of the Sinopec Group, the parent company of Sinopec Corp., would be injected into the listed company before the end of the year.”

CSA smell’s a bid to strengthen the traded shares, especially once Chinese investors jump on the bandwagon.

The assets in question are found in countries ranging from Russia, Australia and Canada.   Company data indicates that by the end of 2008, Sinopec’s overseas recoverable reserves reached 160 million tons.

According to this ChinaMining.org article Sinopec Groups oil equity production in 2008 was 9.01 million tons, accounting for up about one-third of Sinopec’s total output.  This year overseas oil equity output will rise to roughly, 17.40 million tons, almost double the previous year.

Qiu Xiaofeng, an analyst with Merchants Securities, reckon that the Sinopec Group’s overseas assets are able to generate about 11.2 billion yuan of profit or 0.13 yuan EPS, if the oil price stays at 75 US dollars/barrel.  On the news, Founder Securities maintains its rating of “overweight” on Sinopec Corp.  A-stock.

Here’s a look at the two year performance of this growing Chinese energy giant’s shares on the NYSE.

SHI - NYSE

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