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Iron ore drops to three-week low on demand worries

Iron ore fell to the lowest level in almost three weeks on worries that a seasonal decline in demand from steel mills and slowing growth in China, which imports more of the ore than all other nations combined, will curb purchases.

The price of ore with 62 percent iron content delivered to the port of Tianjin declined 0.4 percent to $133.50 a dry ton on Monday, the lowest price since June 12, according to an index compiled by The Steel Index Ltd. Prices fell 2.5 percent last week, taking the second-quarter loss to 9.2 percent.

"The third quarter is known as the dead zone," Tom Price, an analyst at UBS AG, said by phone from Sydney.

Advisory issued to stoke private investment overseas

The National Development and Reform Commission released an implementation advisory on Tuesday to encourage private companies to invest overseas.

The Chinese government intends to give more macro guidance to private enterprises' overseas investments, guiding them to develop energy resources in foreign countries, advanced technology and investments in advanced manufacturing overseas, the document said.

The government also plans to support the advisory by adopting related finance and taxation policies, simplifying management processes and guaranteeing services to private companies that invest overseas.

Lion Global positive on A, H shares

China's yuan-denominated stocks may have more "short-term catalysts" than mainland equities listed in Hong Kong because of government measures to limit the oversupply of initial public offerings, relax regulations for foreign investors and push State-owned enterprises to boost dividend payout ratios, according to Lion Global Investors Ltd.

Lion Global, which was granted a Qualified Foreign Institutional Investor license in May, is also positive on both A and H shares because equity valuations are at "trough" levels, while the government will take measures to prevent the economic slowdown from deepening, Simon Flood, Singapore-based chief investment officer, said in an e-mailed interview.

Goldman Sachs: Aluminum is a good bet

Aluminum is "attractive at these levels" with 20 percent of China's production losing money, Goldman Sachs Group Inc said.

Up to 30 percent of aluminum output outside of China is "loss-making", Goldman Sachs said in a report.

"An expected pick-up in consumption would likely tighten the aluminum balance. This tightening, together with anticipated upside in oil prices, and upside risk surrounding potential Indonesian bauxite export quotas, leave us bullish from here."

Mongolia calls for rerouting of planned gas line

Mongolia is calling on China and Russia to redirect a planned natural gas pipeline across its territory as the world's fastest growing economy seeks to tap the cleaner-burning fuel.

Altering the route to pass through Mongolia would save 1,000 km of pipeline, Mongolian President Tsakhia Elbegdorj said in an interview in Ulan Bator, the nation's capital. It would also allow Mongolia to switch to gas heating in the capital, which ranks among the world's most polluted cities due to widespread use of coal-fired stoves.

"This is economically beneficial," Elbegdorj said. "We are trying to persuade our two neighbors not to exclude us from that project. The Chinese side has already agreed to discuss this and also the Russian side."

Bonded copper inventories drop to 490,000 tons

Copper stockpiles in bonded warehouses in China have dropped to about 490,000 metric tons from 650,000 tons in April, Goldman Sachs Group Inc said.

The global copper market is "broadly balanced", and a Goldman Sachs indicator of China's home appliance and auto copper consumption showed a 7 percent jump in May over a year earlier, the bank said in a report.

Demand outside of China turned positive in March for the first time since July 2011, it said.

Ping An: Lower-rated bond yields may fall

The yields of lower-rated bonds in China, already at a one-year low, have room to fall further after the government allowed insurers to invest in the securities and eased access to credit, according to Ping An Insurance Group Co.

Policy providers, allowed to buy riskier notes for the first time, are bullish as China cuts interest rates, reducing default risks.

The average yield on the lowest-rated securities dropped to 6.3 percent this month, down 110 basis points since regulators permitted insurers to buy unsecured notes in May.

Previously, they were restricted to corporate debt that was guaranteed by other companies. Globally, the riskiest bonds pay 8 percent, Bank of America Merrill Lynch indexes show.

'Time ripe' to cut banks' reserve ratio

The time is ripe for China to cut banks' reserve requirements as slowing inflation gives more room for easing to stabilize growth, said China Securities Journal.

A "timely" reduction by an "appropriate magnitude" can release liquidity and spur lending, the newspaper, published by Xinhua News Agency, said in a front-page commentary on Tuesday. The ratio stands at 20 percent for large banks, a relatively high level, the newspaper said.

A cut in the amount of cash banks must keep as reserves would be the fourth such reduction since November and follow the first lowering of interest rates since 2008.

Ming Yang, Reliance in India joint venture

China Ming Yang Wind Power Group Ltd, China's third-largest wind-turbine manufacturer, has formed a joint venture with India's Reliance Group to develop 2.5 gigawatts of wind farms in South Asia.

Ming Yang will provide engineering, procurement and construction, and Reliance will have a supporting role in developing wind projects, the Zhongshan, Guangdong province-based company said on Tuesday in a statement.

Ecuador 'may seek more China loans'

Ecuador, faced with declining revenue from oil exports and the region's smallest reserves, will probably ask China for another loan to finance its budget deficit this year, Capital Economics Ltd said.

The OPEC nation's economy, which uses the dollar as its official currency, risks a "hard landing" as oil prices fall below levels needed to sustain outlays, Michael Henderson, a London-based economist at Capital Economics, wrote in a note to clients on Tuesday.

"A failure to accumulate savings during a run-up in oil prices means that the dollarized economy now looks highly vulnerable to a sustained period of weaker energy prices," Henderson said. "Policy has been heavily pro-cyclical on the way up and there is now an increased chance of a hard landing as external demand slows."

Agencies - China Daily

(China Daily 07/04/2012 page14)