News Line: Asia's financial markets in focus

1) China cancels stamp tax on stock purchases to support equity markets reports Xinhua

BEIJING, Sept. 18 (Xinhua) -- China decided on Thursday to scrap the stamp tax on stock purchase, effective on Friday, in a move to boost the equities market after domestic stocks fell for third consecutive day since Tuesday.

With the authorization of the State Council, China's Cabinet, the Ministry of Finance and the State Administration of Taxation said they decided to cancel the share trading stamp tax on stock purchase while the stamp tax on share selling remained unchanged at 0.1 percent.

The cancellation came hours after Chinese stocks tumbled 1.72 percent on Thursday, amid the current global financial turmoil.

It was the first time since 1991 authorities had levied an unilateral stamp tax on stocks trading and the second time this year they had adjusted the stock trading stamp tax.

On April 24, it cut the tax from 0.3 percent to 0.1 percent amid falling share prices.

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2) Futures prove a perfect fit for a booming economy (China) reports Xinhua

BEIJING, Sept. 18 -- With a widening product variety and deepening liquidity pools, the mainland's futures market is playing an increasingly important role in serving the national economy.

Zhengzhou Commodity Exchange (ZCE), the first experimental futures market approved by the State Council, was established on Oct 12, 1990. The ZCE, which started with forward contract trading, launched its first futures contracts on five agricultural products - wheat, corn, soybean, green bean and sesame on May 28, 1993.

It still specializes in agricultural and chemical product futures, including hard white wheat, strong gluten wheat, sugar, cotton, rapeseed oil and PTA, a petroleum-based chemical product.

Three years after the establishment of ZCE, Dalian Commodity Exchange announced it would trade in futures contracts underlined by a variety of agricultural produce, mainly grown in Northeast China. So far, futures contracts on soybean, soybean oil, corn, palm oil, soymeal and LLDPE, a petroleum-based product, are traded on the Dalian bourse.

In 1999, Shanghai Futures Exchange was established and China's futures trading was expanded to metal and energy products. Now it deals in six futures products - copper, aluminum, zinc, gold, fuel oil and natural rubber.

Shanghai Futures Tower (Photo: China Daily)

The demand for commodity futures as hedging tools has been on the rise as the Chinese economy continues to advance at a brisk pace. The country is now one of the largest producers and consumers of a wide range of commodities, including oil, steel, copper, corn, wheat and soybean. To diversify their product ranges, the nation's three commodity futures exchanges are doing research to introduce new contracts.

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3) China to adopt news methods to value suspended stocks amid market slump reports Xinhua

BEIJING, Sept. 15 (Xinhua) -- China's fund management companies will adopt new methods such as incorporating industry index to value suspended stocks from Tuesday, China's securities regulators said on Monday.

The move was aimed to prevent abnormal high prices of suspended stocks which resumed trading amid a market slump.

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4) Three Chinese commercial banks hold Lehman-related bonds reports Xinhua

BEIJING, Sept. 18 -- At least three large Chinese commercial banks have disclosed their exposure to the worsening U.S. financial crisis through bonds issued by investment bank Lehman Brothers, which has filed for Chapter 11 protection.

China Merchants Bank Wednesday said in a statement to the Shanghai Stock Exchange that it holds 70 million U.S. dollars of Lehman Brothers bonds, of which 60 million dollars is senior debt and the rest subordinated debt.

The bank also said it has not made special provisions for the book losses on those bonds and will evaluate their potential risks and disclose further details at a later date.

Industrial and Commercial Bank of China (ICBC), the country's largest State-controlled commercial bank by assets, holds 152 million dollars in bonds issued by, or linked to, Lehman Brothers.

At press time, ICBC had not issued a statement to the Shanghai bourse to specify its exposure to Lehman Brothers.

Bank of China (BOC) was also affected by the failure of Lehman Brothers. BOC holds 75.62 million dollars in bonds issued by the ailing U.S. investment bank. It also loaned 53.2 million dollar to Lehman Brothers and its subsidiaries. BOC was reportedly listed as an unsecured creditor in documents filed by Lehman Brothers at the United States Bankruptcy Court of the Southern District of New York.

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5) State investment arm to short up three Chinese lenders' shares with stock-buying plan reports Xinhua

BEIJING, Sept. 18 (Xinhua) -- The Central Huijin Investment Co.,Ltd., an investment arm of the Chinese government, said Thursday it would buy the shares of three major Chinese lenders on the secondary market to shore up their share prices amid stock market slumps.

The company said it would buy the shares of the Industrial and Commercial Bank of China, the Bank of China and the China Construction Bank and operations had started on Thursday.

Central Huijin was set up in 2002 with a mission to reform state-owned banks burdened with a high ratio of non-performing loans.

Courtesy of Xinhua

Chinese banks report surging profits across the board

Everyday when you flip through news channels or search through online or print media you'll probably see something about a US Bank or Financial Institution that has more bad news to report... Falling profits, cutting dividends, government bail outs, new credit losses, etc.

Well... Not in China.

1 -- China's "Fiscal Revenue" and total Banking Assets -- Lets set the tone by beginning with China's latest figures on its fiscal revenue and its total banks' assets. According to Xinhua, China's state media, China's fiscal revenues int he first 7 months of 2008 reached 4.088 trillion yuan or in US dollars $597.6 billion.

Total banking assets, reported by the China Banking Regulatory Commission (CBRC) have reached what I thought at first was a typo.... $8.5 trillion US dollars as of June... See full article for further details on the China's piggy bank.

Click here to access the full article from Xinhua about China's Fiscal Revenue
Click here to access the full article from Xinhua about Chinese Banking Assets


2 -- China's Industrial and Commercial Bank becomes the most profitable bank in the world -- China's ICBC recently became the world's most profitable bank, emerging as bright star of hope in the troubled world of banking. After-tax profit in the half of 2008 totalled 64.88 billion yuan or $9.47 billion US dollars, making it the most profitable bank in the world. Furtermore, the bank is now world's largest by market value with total assets hitting 9.4 trillion yuan or a outstanding $1.37 trillion US dollars. Yes... I did cite that correctly -- TRILLION. Check the article on Xinhua and do the conversion (they provide the figure in yuan) yourself if you don't believe me.

Click here to access the full article for further details on non-performing loans, net fees, commission income, etc. Courtesy of Xinhua


3 -- China's Bank of Communication profit rises 81% for the 1st half of 2008 -- China's fifth largest commercial bank has reported according to Xinhua that profits are up 81% over the same period last year. Net profit came in at 15.51 billion yuan or $2.3 billon US dollars, measured by Internationally Accepted Account Standards. This translates to 0.32 yuan per share, said the Shanghai based lender on Wednesday.

The Banks total assets are valued at 2.43 trillion yuan, about $351 billion US dollars. This represents as reported by the bank a increase of 15.8% from its total assets as of the same time last year. Outstanding loans also increased substantially, totaling 1.22 trillion yuan, roughly $175 billion US dollars, a increase of 16.43% from last year.

Click here to access the rest of the article from Xinhua


4 -- Shanghai Pudong Development Bank Co. reports net profit up 149% -- One of the first banks in China to accept foreign investors, Shanghai Pudong Development Bank which is partly owned by Citigroup said this past Saturday profits for the first half of 2008 soared a whopping 149.62% from the same period in 2007.

The bank reports the huge increase in profits is a result of increasing loans, lower corporate income tax rates and greater fee income. Net profit was 6.38 billion yuan, about $933 million US dollars or 1.12 yuan per share.

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5 -- China Minsheng Banking Corp. reports first-half profits more than double -- Minsheng Bank announced yesterday profits for the first half of 2008 surged 114.29% when compared to the same period last year. The lender reported in its half-year report net profit was 6.046 billion yuan, about $880.6 million US dollars.

Minsheng reports commission charges and fees income surged 3.072 billion yuan, representing a increase in this area of 211.88% over last year. Despite currently having 612.05 billion yuan in outstanding loans, up 10.29% from 2007 and 7.39 billlion yuan in non-performing loans... the bank has reported its "non-preforming loan ratio" was down 1.21% and that much of their current debt is held in equity and bonds from Fannie Mae and Freddie Mac...

In other words (my opinion now), this bank which I recall only entered the international stage in 2006 when I was resiging in China can conviently use the economies woes of Freddie and Fannie Mae in the US to blame much of its bad debt on. Banks in China definetely are not immune to default and non-performing loans... but as one can see this bank in particular can blame Freddie and Fannie for about 1.56 billion yuan of its "bad debt." All in all, I'm sure the execs and people over at Minsheng have far less to fret about than Citigroup, JP Morgan Chase or Wachovia do...

Click here to access the full article from Xinhua


6 -- China's Merchants Bank reports 116% rise in first half profit -- During the first half of 2008 net profit for China's Merchant Bank was 13.23 billion yuan ($1.92 billion US dollars). This represents a increase of 116.42% from 2007. Net interest income accounted for a large chunk, bringing in 83.91% of its total income, while non-interest income generated 16.09%.

The bank stated the surge in net profit was mainly a result from the rapid growth of earnings on net interest, as well as sustained rapid growth of non-interest income.... Like Minsheng (look above), the bank said as of June 30th, much of its "bad debt" was in the form of Freddie and Fannie Mae bonds with a face falue of $180 million US dollars, allowing yet another Chinese bank to point the finger at the US when explaining to its shareholders some of the negative points in its financial position and accounting sheets during the first half of 2008.

Click here to access the full article from Xinhua


7 -- Argicultural Bank of China profit up 39% in first half of 2008 -- The Agricultural Bank of China (ABC) has stated domestic pre-tax operating profits rose 39 percent year-on-year to 54.3 billion yuan (7.95 billion U.S. dollars) for the January-June period.

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