KraneShares is the advisor to the KraneShares CSI Five Year Plan ETF and the KraneShares CSI China Internet ETF. Enclosed is a weekly update of China’s economic and capital markets activity that was assembled by KraneShares and its Shanghai based partner, CapitalVue.
Major News and Events:
- China’s GDP growth rebounded to 7.8 percent in the third quarter from 7.5 percent in the previous three months. The median estimate in a Bloomberg survey of 34 economists last month was for fourth-quarter expansion of 7.6 percent.
- China’s output growth also unexpectedly accelerated and inflation stayed below the government target. Production rose 10.3 percent from a year earlier, according to the countries’ National Bureau of Statistics, exceeding the 10 percent median estimate in a survey of economists and the previous month’s 10.2 percent. Inflation was a less-than-forecast 3.2 percent and producer prices fell 1.5 percent. The data, following an unexpectedly large jump in exports reported Nov. 8, add to a picture of an economy that is gaining strengt
- Rockwell Automation Inc. Chief Executive Officer Keith Nosbusch said factory demand in China from the auto, export and energy industries will drive sales at the U.S. maker of factory-efficiency equipment and software after a 2013 slowdown. “We started to see growth in China in the second half of the year and that momentum will continue into 2014,” Nosbusch said in a Nov. 7 interview.
- China’s Xinhua News Agency reported that reform of State Owned Enterprises (SOEs) is beginning to take shape. Many of these companies are enacting plans to modernize their infrastructure, allow for private capital investment, open up their boards to international members and to go public through a listing on one of China’s stock exchanges.
- China’s Cyber Monday: Chinese shoppers spent a record amount through Internet retailers on Monday 11/11, smashing last year’s tally for the country’s busiest online shopping day by early afternoon. What began as a holiday for singles has morphed into an online retail frenzy that dwarfs the US Cyber Monday, the day after the Thanksgiving weekend. According to CNN Money, sales on Tmall.com, China’s version of Amazon (AMZN), run by Alibaba, reached $164 million in the first few minutes of the day. By early afternoon, sales on Alibaba’s shopping sites surpassed last year’s figure of $3.1 billion — double the $1.5 billion netted on Cyber Monday by Amazon.
- A gold vault that can store 2,000 metric tons, double China’s projected consumption this year, opened in Shanghai this month in anticipation of rising demand in Asia’s largest economy. The site could hold gold bullion worth about $82.5 billion at today’s price, according to Bloomberg news. China’s total demand may reach 1,000 tons in 2013, the World Gold Council (WGC) forecasts. Consumption in China may increase 29 percent to a record this year, overtaking India as the biggest user as lower prices and higher incomes spur demand, according to the WGC. Demand for gold jewelry, bars and coins in Greater China, India, Indonesia and Vietnam is now about 60 percent of the global total, up from 35 percent in 2004, according to HSBC Holdings Plc.
- Exports to China from California, America’s largest wine producing region, jumped 20% over a year earlier. China is now the state’s fifth largest export market for wine. Linsey Gallagher of the Wine Institute — a trade group — says the flavor of Californian wine suits Asian cuisine. And the state’s positive image in China is also driving demand. “Even in remote parts of China, people know about Governor Arnold Schwarzenegger, Baywatch, the Golden Gate bridge, and it’s always a positive association,” she said.
Local Broker Insight:
BOCOM International – Third Plenum:
“383” reform draft from a government research body takes a long term outlook so that cyclical fluctuations no longer carry great weight. It proposes that the compensation for land acquisition be made at fair market rates, which will hurt the capability of governments to repay debt. It is thus imperative to make changes in the fiscal system, and to seek other tax sources, such as property tax. http://www.bocomgroup.com/en/securities-futures/securities-brokerage.html
Galaxy – Liquidity:
The PBOC restarted reverse repurchase operations last week, easing the pattern of tight liquidity. The small scale of reverse repurchase operations and a bid rate moving higher with market momentum is a signal of the PBOC’s neutral-to-tight stance. The continued “locking long-term but relaxing short-term liquidity” operations highlight the PBOC’s efforts on limiting mismatched maturities for financial institutions. http://www.chinastock.com.hk/en/ACG/ContactUs/index.aspx
Galaxy – Agriculture:
Premier Li Keqiang mentioned agricultural modernization and agricultural machinery subsidies on an inspection tour of modernized agriculture production in Heilongjiang. He also pointed out that development of modern agriculture is still dependent upon reform. With the Third Plenum at hand, Li’s inspection tour of Heilongjiang’s modern agricultural comprehensive reform pilot will likely draw attention to the agriculture sector. http://www.chinastock.com.hk/en/ACG/ContactUs/index.aspx
SYWG
Premier Li Keqiang gave an economic trend report at the All China Federation of Trade Unions National Conference. His report highlighted a greater need for resolving issues that are highly relevant to employees. Premier Li also highlighted that an economic growth rate of 7.2% is required to generate 10 million new jobs and maintain an unemployment rate of roughly 4% for registered citizens in urban and rural areas, according to estimates from the Ministry of Human Resource and Social Security. http://www.sywg.com.hk/catalog/securities/english/ser_06.html