Krane Funds Advisors 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. Please contact us if you have any questions or comments.
Major News and Events
• Goldman Recommends China Stocks: Goldman Sachs recommended going long China stocks and short copper as a way to get exposure to quickening global economic growth in 2014, alongside weak commodity prices and the desire to own risky but profitable stocks. The recommendation is Goldman’s fourth top trade idea for 2014.
• British PM China Trade Mission: On a 3 day official visit to China British Prime Minister David Cameron and Chinese Premier Li Keqiang commited to enhance cooperation in areas including high-speed railway, nuclear power and finance. Concerning the financial sector, the two sides discussed conducting offshore RMB business in London and Chinese banks’ opening of branches in Britain. The two countries also agreed to expand bilateral high-tech trade and support cooperation in aerospace, offshore wind power and other new energy development in a sign of the commitment to better relations between the two large economies.
• Cleaning up Coal Production: The State Council published new rules to curb growth in coal mining production capacity. It said the government will not approve new coal mines with annual output of less than 300,000 tons and will gradually close down mines with annual output of less than 90,000 tons.
• IPOs Set to Unfreeze: China’s financial regulator released new guidelines for IPOs following an almost 1 year freeze on new listings. Also allowed for the first time will be the issuance of preferred shares by banks. The IPO freeze will be lifted following new rules that pave the way for a switch to a U.S.-style registration system and letting investor demand determine pricing. 50 companies will be ready for IPOs by end of January and the watchdog may also begin a trial program for letting companies sell preferred stock.
• Harvard Business Review – China Internet Numbers are Staggering: According to a report by the Harvard Business Review, the size of the Chinese Internet is staggering. There are almost 600 million Internet users in China now, more than in any country in the world — next highest is the U.S, with 254 million. That’s just 44% of the Chinese population compared to 81% in the U.S., so this gap will continue to grow. For example, if every province in China achieves a 50% penetration rate, 135 million new Internet users will come online. 78.5% of Chinese users access the web from their mobile devices (compared to 63% in the U.S.), and many of the most popular services, like WeChat, exist only as a mobile application.