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Nation sees net capital outflow in July

Chinese banks sold a net 3.8 billion yuan ($597.3 million) in foreign exchange in July, following a net purchase of 49.1 billion yuan in June, according to Reuters calculations based on data published by the central bank on Tuesday.

That suggested there were net capital outflows from the country last month. A darkening global economic backdrop has dented investors' appetite for emerging market assets and caused many to begin scaling back exposure to currencies other than the US dollar.

Mengniu Dairy in talks to buy Modern Dairy

China Mengniu Dairy Co, the country's largest dairy producer, has held talks to acquire raw milk supplier China Modern Dairy Holdings Ltd, said two people with knowledge of the matter.

The companies' largest shareholders, COFCO Corp and KKR & Co, have been involved in the discussions, the people said, asking not to be identified because the information is private. State-owned COFCO holds 20 percent of Mengniu, while New York-based private-equity firm KKR owns 24 percent of Modern Dairy, according to data compiled by Bloomberg. Modern Dairy rose as much as 18 percent in Hong Kong trading on Tuesday.

Buying Modern Dairy, China's largest raw milk producer, would give Mengniu more control over its milk supply as concerns about safety in the nation's dairy industry linger. Ma'anshan-based Modern Dairy generated almost all of its 735.6 million yuan ($116 million) of revenue for the six months through December from supplying Mengniu with unpasteurized milk.

Ministry may sell five-year government bonds

The Ministry of Finance will sell at least 30 billion yuan ($4.7 billion) of five-year bonds at a yield of 2.89 percent on Wednesday, according to the median estimate in a Bloomberg News survey of six finance companies.

The highest forecast was 2.93 percent and the lowest 2.87 percent. The yield on similar-maturity notes was 2.98 percent in the secondary market on Monday, according to data compiled by Chinabond.

Investors will bid on the yield at the auction. The issuer will set the security's coupon by taking an average of the winning bids.

Faber pessimistic on China, favors European stocks

China's economy will slow "considerably", said Marc Faber, the publisher of the Gloom Boom & Doom report, who is buying European stocks.

"The growth rate we had in the last 10 years, which was around 10 percent annually, is going to slow down considerably," Faber told Bloomberg. "I would rather wait to buy Chinese stocks until we see the result of the stimulus packages."

The Shanghai Composite Index has fallen 13 percent from its high this year on March 2, while the Hang Seng China Enterprises Index of mainland stocks traded in Hong Kong lost 16 percent amid concern the economic slowdown is deepening. The Shanghai gauge slid 1.5 percent on Monday after Bank of America Corp joined Deutsche Bank AG and Barclays Plc in cutting economic growth forecasts for China. It rose 0.3 percent at the close on Tuesday.

Chalco expected to drop SouthGobi takeover offer

SouthGobi Resources Ltd said on Tuesday that it expects State-owned Chalco to drop its takeover offer for the Mongolia-focused coal miner as the Mongolian government opposes the deal.

"I personally believe Chalco is not continuing to work on the deal," said SouthGobi Chief Executive Alex Molyneux.

"The evidence I have before me seems highly unlikely that the bid is going to go forward," Molyneux said by telephone, citing the Mongolian government's recent efforts to block the deal. "It's 100 percent clear that Mongolia has made the deal impossible."

Aluminum Corp of China Ltd, better known as Chalco, in April announced a $926 million bid for a controlling interest in SouthGobi, which owns large coal projects in Mongolia close to the Chinese border.

Wal-Mart gets approval to raise stake in Yihaodian

Wal-Mart Stores Inc has received restricted approval to raise its stake in and become the controlling shareholder of a Chinese e-commerce company, the Ministry of Commerce said on its website on Tuesday.

With more than 200 million Chinese people shopping online, China is expected to become the world's largest e-commerce market by 2015, Boston Consulting Group said in a report.

Wal-Mart had said in February it would raise its stake in online supermarket Yihaodian to around 51 percent by buying into its parent. Wal-Mart did not provide any financial details of the deal.

The acquisition was subject to an anti-monopoly review that was extended several times and finally approved with restrictions after the commerce ministry decided the deal may have a negative impact on competition given Wal-Mart's and Yihaodian's leading positions in the market.

"Walmart's application to increase its investment in Yihaodian, a fast-growing e-commerce website in China, received conditional approval by the ministry's Anti-Monopoly Bureau on Monday.

Bank cuts GDP growth forecast to 7.7%

Bank of America Merrill Lynch on Monday downgraded its 2012 annual GDP growth forecast for China to 7.7 percent from 8 percent.

The bank also lowered China's economic growth forecast in the third quarter from 8 percent to 7.4 percent, and from 8.3 percent to 7.7 percent in the fourth quarter.

The downgrade is due to concerns including limited room for China to further ease monetary policy, the government's growing sensitiveness to the real estate rebound, and the deteriorating prospect of economic growth in developed economies, the bank said in a report.

The bank also lowered its 2013 annual GDP growth forecast for China to 7.6 percent from 8 percent.

Suning falls to 4-year low on spending concerns

Suning Appliance Co, China's biggest electronics retailer by market value, slumped to a four-year low on concern the company will overspend to expand its business, which would hurt its earnings outlook.

The stock lost 7.3 percent to 5.88 yuan (92 US cents) at its close in Shenzhen, the lowest close since Nov 12, 2008. The Shenzhen Composite Index rose 0.56 percent.

Suning officials, including Chairman Zhang Jindong, didn't immediately answer three calls to their offices by Bloomberg.

The company's board approved a plan to sell 8 billion yuan in 10-year bonds, with the proceeds used to replenish working capital and adjust its debt structure, according to a statement to the bourse on Monday. The bond plan comes after the company raised 4.7 billion yuan in a private sale of 386 million new shares in July.

Suning's first-half net income fell 30 percent from a year earlier to 1.74 billion yuan, according to a preliminary earnings statement on July 30.

August oil refining may increase 3.4 percent

China's oil refiners may process 3.4 percent more crude in August than a month ago as some plants end maintenance, according to Oilchem.net.

Throughput will increase to 38 million to 39 million metric tons, Oilchem.net reported on its website on Monday. That's equivalent to as much as 9.2 million barrels a day. China Petroleum & Chemical Corp, or Sinopec, and PetroChina Co, the nation's top refiners, plan to process a combined 30 million tons in August, up 1.6 percent compared with July, it said.

Sinopec will refine about 18 million tons, up 2 percent, and PetroChina is scheduled to process around 12 million tons, 1.1 percent more, the Shandong-based industry website said. Sinopec Shanghai Petrochemical Co ended maintenance in July, boosting volume this month, according to Oilchem.

China refined 37.6 million tons of crude in July, up 1.1 percent from a year earlier, the National Bureau of Statistics said on Thursday.

Bank of China cuts price forecasts for thermal coal

Bank of China Ltd cut its forecasts for thermal-coal prices, saying demand growth is slowing with the nation's economy, and hydropower generation is increasing.

The bank reduced its 2012 estimate for the average spot price by 10 percent to 708 yuan a metric ton ($111) for Shanxi coal of 5,500 kilocalories a kilogram, Lawrence Lau, an analyst in Hong Kong, said in a note on Monday. Bank of China's forecast for the two years beginning in 2013 is 668 yuan a ton, 17 percent lower than its previous estimate.

"Weaker-than-expected demand, high inventory and more competitive imports as a result of dumping by the US resulted in a sharp fall in China's spot thermal-coal price in mid-June to early July," Lau said. "Although the spot thermal coal price has bottomed out, we don't expect a decent rebound unless inventory at ports and power plants can be reduced to normal levels."

Two policy banks plan bond sales worth 30b yuan

The Export-Import Bank of China and the Agricultural Development Bank of China, two of the nation's policy banks, plan to sell a total of 30 billion yuan ($4.7 billion) of bonds, the companies said on Tuesday.

Exim Bank plans to sell 15 billion yuan of seven-year notes beginning on Friday, it said in a statement published in the Financial News on Tuesday. Agricultural Development Bank plans to sell 15 billion yuan of five-year securities on Aug 20, it said in a statement in the same newspaper, which is published by the People's Bank of China.

Exim Bank sold 30 billion yuan of seven-year bonds with a 3.71 percent coupon in June, according to data compiled by Bloomberg.

Hotel launches e-commerce booking services

InterContinental Hotels Group said on Tuesday it is launching its first flagship e-store on one of China's leading online travel booking platforms.

Chinese consumers will now be able to use Taobao Travel, which is operated by Taobao Marketplace, to book their IHG hotels.

The website will redirect to the hotelier's new China booking website cn.ihg.com, where consumers will confirm their bookings.

The cooperation marks a trend in which hotel brands are starting to tap the country's booming online tourism market, propelled by an increasing middle class, the growing usage of credit cards and electronic-payment services, and soaring Internet-based consumption.

Power consumption grew 4.5 percent in July

China's total electricity consumption grew 4.5 percent year-on-year to 455.6 billion kWh in July, the National Energy Administration said in a statement on its website on Tuesday.

Cumulative electricity consumption in the first seven months was 2.83 trillion kWh, up 5.4 percent year-on-year, compared to the 5.5 percent seen in the first half of the year, the NEA said.

Power consumed by the agricultural sector decreased 0.4 percent year-on-year, while electricity consumed by the industrial and manufacturing sector increased 3.6 percent year-on-year to 2.1 trillion kWh.

The services industry had the fastest growing power consumption, expanding 11.9 percent year-on-year to reach 319.3 billion kWh.

In the first seven months of the year, China added 28.92 million kilowatts of new power-generating capacity nationwide, among which 6 million kilowatts were created by hydropower projects and 17.9 million kilowatts by thermal power plants.

China Daily-Agencies

(China Daily 08/15/2012 page14)