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Bright Food said to offer fees on Weetabix deal loan

China's Bright Food Group Co is believed to be changing the financing arrangements on its planned acquisition of a majority stake in Weetabix Ltd.

According to industry sources, the company now plans to pay fees on a loan backing the acquisition plus a margin totaling about 230 basis points, the sources said.

The company originally offered to pay zero fees to potential lenders and a margin of 230 basis points.

Calls made to confirm the new arrangement, to the offices of Bright Food in Shanghai, went unanswered.

The Shanghai-based food manufacturer, which is seeking about $800 million in financing to back the deal, is believed to be considering issuing a $300 million bond as part of the financing and fund the remainder with bank loans.

China's money rate surges to seven-month high

China's money-market rate surged to its highest level in seven months amid speculation banks are hoarding cash to meet quarter-end regulatory requirements and holiday withdrawals.

The overnight repurchase rate climbed for a fourth day even after the People's Bank of China injected 101 billion yuan ($16 billion) into the financial system this week, ending a three-week run of withdrawals.

On Thursday, the central bank conducted 55 billion yuan of seven-day and 105 billion yuan of 28-day reverse-repurchase operations to add funds. China's financial markets will be shut for a weeklong break from Oct 1.

"Cash supply has become quite tight as the holiday and quarter-end approaches," said Hu Hangyu, a Beijing-based bond analyst at Citic Securities Co, China's biggest listed brokerage.

"Even though the central bank has stepped up injections, it can't prevent a cash crunch."

Coal prices to rise by 3% on lower supplies, stockpiling

The industry analyst UOB Kay-Hian Ltd has predicted that power-station coal prices in China will rise 3 percent in the fourth quarter from the previous three months, as utilities increase stockpiling amid a drop in supplies.

Benchmark thermal coal with an energy value of 5,500 kilocalories per kilogram at Qinhuangdao, China's largest port for the fuel, is estimated to climb to an average of 650 yuan ($103) a metric ton, said UOB said in an analyst note on Thursday.

Electricity plants are building inventories before maintenance on the nation's biggest coal-transport railway, while domestic output fell last month and imports may be curbed by a narrowing gap between local and overseas prices, it added.

Helen Lau, UOB's Hong Kong-based analyst, said: "We believe coal prices are set to recover. The number of coal ships queuing up at Qinhuangdao port reached 137 vessels in mid-September, implying that power plant restocking demand has resumed. Imports will still be dampened going forward, implying coal imports may be weighed down."

Qinhuangdao coal was unchanged for a third week in a range of 625 to 635 yuan per ton as of Sept. 17, according to the China Coal Transport and Distribution Association.

UBS: Economic recovery expected in final quarter

China's economy is likely to see a slight rebound in the fourth quarter and reach 7.5 percent GDP growth in 2012, thanks to a better real estate market and the relatively proper price/earnings ratios in the stock and security markets, according to Gao Ting, managing director of UBS Securities Co Ltd.

"I don't think there will be another 4 trillion incentives issued by the government, but indicators show the micro economy of China is getting better," Gao said, referring to the 4 trillion-yuan ($635 billion) stimulus of four years ago.

"Given the inertia in the economy, I think a gradual slip of the market is possible," Gao said.

"Though the US economy might fall off the fiscal cliff at the end of this year, we think the US labor and real estate market can't get any worse."

Because of the positive fiscal policies of the Chinese government, Gao recommended investors focus on the financial industry other than on banks.

"The stocks of real estate, electricity, food and medical companies have the potential to go up as well," Gao said.

The performance of shares in the third quarter is not satisfactory, as banks, which have the lion's share in financial stocks - accounting for 58 percent of the net profit of cyclical industry in the first half - have seen a decline of profit growth, Gao said.

China overtakes US as largest crop importer

China passed the US last year for the first time to become the biggest importer of agricultural products, while also increasing its exports, according to data by the World Trade Organization.

Imports, including food and beverages, rose 34 percent to $144.7 billion in 2011 from $108.3 billion in 2010, according to Bloomberg calculations based on data released by the Geneva-based trade body.

Exports gained 25 percent to $64.6 billion, beating Canada to become the sixth largest, the data show.

The country's rising population was highlighted as the reason for growth demand from soybeans, corn, feed livestock, powdered milk and sugar to make beverages.

Urbanization widened China's water and land shortages, further fueling a global rally in crops amplified by drought-reduced supply.

China's ethylene production capacity to increase

China's ethylene production capacity will continue to increase during the 12th Five-Year-Plan (2011-15), and is expected to reach an annual production capacity of 25.56 million metric tons in 2015, a senior official said on Thursday.

China now has an annual ethylene production capacity of 15 million tons.

Although China's economic growth is slowing down, foreign investors still believe in China's energy market in the long term, said Zhang Fuqin, an engineer at the China Petroleum and Petrochemical Engineering Institute.

She said that China's demand for ethylene, a material used in many industrial products, will increase at an annual growth rate of 5 percent from 2010 to 2015. The growth rate will rise to 5 percent to 7 percent from 2013 to 2015.

Experts call for more share repurchases

Experts urged 81 listed companies trading below their book values to follow the example of Baoshan Iron and Steel Co Ltd and buy back their own shares.

Baosteel said recently it will repurchase 5 billion yuan ($793.74 million) worth of its shares.

"For companies with a low price-to-book ratio, buying back shares is good for both the company and its shareholders if the company's capital flow is fine," said Li Xunlei, deputy general manager and chief economist at Haitong Securities Co Ltd. "There is an investment opportunity in companies that are financially sound but have a below one price-to-book ratio."

By Sept 19, there were 82 listed companies, including Baosteel, trading below their book values on the Shenzhen and Shanghai stock markets. About 30 percent of them are blue-chip companies with a market capitalization of more than 10 billion yuan, such as Bank of Communications Ltd, Shanghai Pudong Development Bank Co Ltd, Baosteel, China Communications Construction Co Ltd and China Railway Group Ltd, according to information collected by Shanghai Securities News.

Deloitte says Caterers could benefit from consolidation

Players in China's catering industry should explore merger and acquisition opportunities to help them meet rising market challenges, according to financial services firm Deloitte Touche Tohmatsu.

The catering industry faces a host of issues including rising operation costs, poor food safety, labor shortages and a rapidly transforming Chinese economy that is reshaping customer demand, a Deloitte report said.

Escalating customer requirements mean companies could benefit from better brand recognition, fostered through industry integration, the report added.

China's catering industry had been dominated by small and medium-sized enterprises, but in recent years that picture has begun to change as an increasing number of restaurants seek large and standardized operations.

Telecom giant shifts towards e-commerce

China Mobile Ltd, the world's biggest telecom operator by subscriber, aims to sell up to 30 percent of its customized mobile phones via e-commerce channels over the next three years, according to a high-level official in the company.

Ma Jingxin, deputy general manager of China Mobile Terminal Co, a mobile phone subsidiary of China Mobile, said the company is about to launch a self-operated, online mobile phone store to help boost handset sales. But he did not disclose the specific date.

Previously, China Mobile had opened a flagship store in Tmall.com, China's biggest business-to-customer e-commerce website.

Established in April 2011, Ma said China Mobile Terminal had sold almost 30 million mobile phones so far. China Mobile usually purchases large quantities of handsets from different mobile phone manufacturers and offers subsidies for those devices.

Rail projects will boost steel demand by 3%: Citigroup

Steel demand in China will climb 3 percent, as a result of $157 billion worth of approved new rail projects, according to Citigroup Inc.

The country's steel overcapacity of 718 million metric tons in 2009 has grown 23 percent to 884 million tons, the bank said in a report.

Steel consumption intensity to fixed-asset investment has also dropped 40 percent since 2009, it said.

"The recent stimulus measures announced are unlikely therefore to materially increase steel demand; we forecast an incremental uptick of 3 percent."

Rubber drops most in two weeks on Chinese demand

Rubber has slumped the most in two weeks after a survey showed China's manufacturing may contract for an 11th month in September, raising concerns demand from the world's largest user may weaken for the commodity used in tires.

February-delivery rubber lost 2.4 percent to settle at 253.9 yen a kilogram ($3,25) on the Tokyo Commodity Exchange, the biggest drop since Sept. 5 and extending this year's loss for the most-active contract to 3.6 percent.

The preliminary reading was 47.8 for a purchasing managers' index released by HSBC Holdings Plc and Markit Economics, adding to signs that China's economy is decelerating for a seventh quarter.

It compares with the 47.6 final reading last month and if confirmed would extend the gauge's longest streak below the expansion-contraction dividing line of 50 in the survey's eight-year history.

"The market was weighed down by concerns that China's economic slowdown may worsen," said Takaki Shigemoto, an analyst at research company JSC Corp in Tokyo.

China Daily -Agencies

(China Daily 09/21/2012 page14)