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Thursday, May 31, 2012

Book on Beijing ex-mayor's reassessment of Tiananmen hits HK shops as China ... - Washington Post

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HK, China shares eke out gains, PMI keeps cyclicals weak - Reuters

Fri Jun 1, 2012 1:10am EDT

(Updates to midday)

* Hang Seng Index firms 0.1 percent,

* Shanghai Composite up 0.4 pct, CSI300 up 0.6 pct

* Sands China to join HSI effective after market close

* Softer crude oil prices help refiners, hit CNOOC

* Chalco down 3.6 pct on aluminum output cut, JPM downgrade

By Vikram Subhedar

HONG KONG, June 1 (Reuters) - Hong Kong shares edged higher on Friday largely on short-covering in financials, although disappointing manufacturing data from China kept most cyclical sectors such as materials and mining companies weak.

Two surveys that pointed to sluggish Chinese factory activity in May signalled a deeper-than-forecast deterioration in demand at home and abroad, but also increased the likelihood of further policy easing.

The Hang Seng Index, which opened weaker on the day, was up 0.14 percent at the midday trading break. The slim gain did little to excite investors after last month's 12 percent slump almost wiped out the benchmark's gains for the year.

On the mainland, the Shanghai Composite Index was up 0.42 percent, while the large-cap focussed CSI300 rose 0.55 percent as China's domestic benchmarks continued to outperform Asian markets on hopes of policy easing.

"The big hangover from Europe remains and everyone's looking for safe havens," said Tom Kaan, a director at Louis Capital Markets in Hong Kong. "The problem is where is the safe haven and that has kept large long-only investors on the sidelines because this isn't the environment in which to double-down. Activity is largely down to those who can make the two-way bets."

Short-selling in Hong Kong has remained relatively high through the market's weakness, with short interest expressed as a percentage of turnover averaging about 10 percent in May and rising above 14 percent on two days in the past two weeks, according to data from the exchange.

Historically, short-selling on average has comprised about 8 percent of daily turnover in Hong Kong.

Friday's gains were supported by strength in banking stocks that saw some investors cover bearish bets ahead of U.S. payrolls data due later in the day, said traders.

Index rebalancing activity, which accounted for a large part of trading on Thursday due to adjustments in the MSCI indexes, is expected to play a role again as the Hang Seng Index sees changes effective at the close of trading.

Sands China Ltd will become the first casino operator to become a benchmark constituent in Hong Kong and is expected to have a weighting of 1.1 percent.

Traders estimate passive investors and exchange-traded funds that track the index will have to buy about $123 million worth of Sands China stock, representing twice its 30-day average turnover, as a result of its inclusion.

China Construction Bank Corp and Tencent Holdings Ltd, which had seen about a fifth of their daily turnover in Hong Kong shorted in the previous session, were the biggest boosts on Friday.

CCB rose 0.6 percent while Tencent, China's dominant internet firm, rose 1.3 percent.

A drop in crude oil prices, partly due to weakening demand in China, helped refiners who would benefit from wider refining margins.

China Petroleum and Chemical Corp (Sinopec), Asia's largest refiner, rose 0.3 percent while PetroChina Co Ltd was up 0.8 percent. CNOOC Ltd, a pure exploration and production company, dropped 1.1 percent.

Aluminum Corp of China Ltd fell 3.6 percent after JPMorgan downgraded the stock to "underweight" from "hold" and forecast a loss for the company from an earlier profit projection.

Chalco has lost 27.2 percent from its February 2012 high as weak demand, a supply glut and a drop in alumina prices due to a slowing economy have kept investors at bay. (Reporting by Vikram Subhedar; Editing by Chris Lewis)


China Factory Surveys Signal Wider Economic Weakness - CNBC.com

ChinaFotoPress | Getty Images


China's official purchasing managers' index (PMI) fell to 50.4 in May, the weakest reading this year and down from April's 13-month high in the latest sign that output in the world's second biggest economy is cooling.

The news sent Australian stocks and the Aussie dollar lower, as the commodity-rich country counts China as its biggest trading partner.

Economists polled by Reuters this week had expected the official PMI to retreat to 52.2 for May, from 53.3 in April.

"This data shows the speed of growth has shown some moderation, but the index has been above 50 for six months which means the growth momentum hasn't changed," the National Bureau of Statistics said in a statement accompanying the index.

"The present short term moderation in growth does not mean the Chinese economy is entering a new recession," it added.

The HSBC China Flash PMI, which gave an earlier glimpse of activity in China's vast factory sector, also retreated in May, reflecting a seventh straight month of contraction. HSBC's final May reading will be released later on Friday.

Unexpectedly weak data for April, including a 9.3 percent annual rise in factory output, the weakest pace in nearly three years, galvanized central planners into releasing a number of pro-growth measures, including accelerating project approvals and permitting private capital into sectors previously reserved to the state.

Analysts now expect China's economy will only regain momentum in the second half of this year.

China eyes boosting domestic demand: vice NDRC head - Reuters

BEIJING | Thu May 31, 2012 11:33pm EDT

BEIJING (Reuters) - China aims to boost domestic demand to keep the economy on a sound footing this year, a top government official said on Friday, amid expectations that the government will unveil more stimulus measures to combat a slowdown.

"We will ensure sound and fast economic growth this year," Du Ying, vice chairman of the National Development and Reform Commission (NDRC), China's most powerful economic planner, told a news conference.

But Du said the pace of economic growth, which is set to slow for a sixth consecutive quarter due to slackening demand at home and abroad, is still "within expectations".

Global markets were rife with speculation this week that China is about to unveil another round of fiscal stimulus to steady the world's No. 2 economy as Europe sinks deeper into its debt quagmire.

The government has been fast tracking infrastructure and industrial investment projects while doling out subsidies for energy-saving home appliances and cars to underpin demand.

But a senior NDRC official said this week there was little chance of China rolling out another giant spending package similar to that in 2008/2009, when Beijing pushed out a 4 trillion yuan ($628 billion) stimulus to fight the financial crisis.

Although the massive spending helped China's economy bounce back quickly from the depths of the crisis, it also left a trail of sour government loans in its wake.

Investor hopes that Beijing will step in to support the economy are unlikely to fade in coming weeks, especially after China's official purchasing managers' index was shown sinking nearly 3 points to a 2012 low of 50.4 in May.

Expectations are growing that the People's Bank of China could move to cut interest rates, at least lending rates, to deal with risks in growth and corporate profits.

The central bank has cut the amount of cash that banks must hold as reserves three times, each by 50 basis points, since November and analysts expect further cuts in the coming months.

($1 = 6.3690 Chinese yuan)

(Reporting by Koh Gui Qing; Editing by Ken Wills and Edwina Gibbs)


China has not decided to quicken lending: report - Reuters

BEIJING | Thu May 31, 2012 11:12pm EDT

BEIJING (Reuters) - China has not told banks to speed up lending and will set credit policy in line with economic conditions, a vice chairman of the country's banking regulator said in remarks published on Friday, as fresh data raised fears that business activity may be cooling faster than expected.

China has increased its policy emphasis on supporting growth recently, fast tracking infrastructure investment and providing subsidies for consumption, fuelling speculation that Beijing may be eyeing another fiscally-led lending spree, like the 4 trillion ($635 billion) stimulus adopted to combat the last global financial crisis.

"The China Banking Regulatory Commission has always been doing what it is told to from above. We are all still watching changes and there is no conclusion yet," CBRC vice chairman Cai Esheng said, when asked if China would relax mortgage policies.

China tightened housing policies after the last stimulus program triggered frenzied real estate speculation that drove home prices well beyond the reach of ordinary working citizens.

Housing costs have eased slightly since, but remain elevated and government leaders repeatedly insist there will be no easing of the tightening policy until prices return to what are described as "reasonable levels".

Whether the regulator will increase the credit quota and accelerate the pace of lending depends on changes in the economy, the Securities Times cited Cai as telling a forum.

He added that the CBRC's main objective was to watch bank behavior and support the state's macroeconomic policy as well as the central bank's monetary policy.

China's central bank is scheduled to announce money supply and new lending data for May from June 10 onwards.

China's official purchasing managers' index fell more than expected to 50.4 in May, the weakest reading this year and down from April's 13-month high, in the latest sign that output in the world's second-biggest economy is cooling.

(Reporting by Langi Chiang and Nick Edwards; Editing by Kim Coghill)


Copper firmer, shrugs off China PMI data - Reuters

A worker checks a shipment of copper inside the plant at the copper refinery of Codelco Ventanas in Ventanas city, about 164 km (101 miles) northwest of Santiago, April 16, 2012. REUTERS/Eliseo Fernandez

A worker checks a shipment of copper inside the plant at the copper refinery of Codelco Ventanas in Ventanas city, about 164 km (101 miles) northwest of Santiago, April 16, 2012.

Credit: Reuters/Eliseo Fernandez

SHANGHAI | Thu May 31, 2012 10:43pm EDT

SHANGHAI (Reuters) - London copper rose on Friday, supported by short covering after prices hit the lowest level of the year in the prior session and as investors had priced in disappointing Chinese manufacturing data in the world's biggest consumer of the metal.

Gains were likely to be limited, however, due to concerns over the European debt crisis, which has escalated in recent weeks on the prospect that Greece could exit the euro zone and on worries over Spain's shaky finances.

FUNDAMENTALS

Three-month copper on the London Metal Exchange lifted 0.6 percent to $7,466.75 a metric ton (1.1023 tons) by 9.46 a.m. EDT, after sinking to its lowest level price of $7,403 in 2012 in the prior session.

The most-active September copper contract on the Shanghai Futures Exchange lifted 20 yuan to 54,550 yuan ($8,600) a metric ton after hitting a fresh 2012 low of 54,210 yuan earlier in the session. It fell 1.4 percent on Thursday.

"The markets had lowered its expectations of China's economic performance in May over the past few sessions and had priced in that pessimism along with fears over the euro zone. Short-coverers and some fresh longs have started to come in, but sentiment is still cautious," said CIFCO analyst Zhou Jie.

China's official purchasing managers' index (PMI) fell to 50.4 in May, the weakest reading this year and down from April's 13-month high in the latest sign that output in the world's second-biggest economy is cooling.

The European Central Bank stepped up pressure on Thursday for a joint guarantee for bank deposits across the euro zone, saying Europe needed new tools to fight bank runs as the bloc's debt crisis drives investors to flee risk.

Private payroll growth accelerated only slightly in May and claims for jobless benefits rose last week, suggesting the U.S. labor market recovery was stalling after a strong performance early in the year.

Head of the International Monetary Fund Christine Lagarde denied on Thursday a media report that the Fund was considering contingency plans for a Spanish bailout. The report had caused Wall Street stocks .SPX to sharply cut losses.

The Federal Reserve could resort to more quantitative easing if the U.S. economy deteriorates, but this situation is unlikely as it is on track for a moderate recovery, an official of the U.S. central bank said on Thursday.

For the top stories in metals and other news, click <TOP/MTL>, <TOP/MACRO> or <MET/L>

MARKET NEWS

The euro hit a two-year low on Friday and was seen at risk of falling further in coming weeks, dogged by worries that Spain may need external aid to shore up its struggling banking sector and fix its public finances.<USD/>

($1 = 6.3690 Chinese yuan)

(Reporting by Carrie Ho; Editing by Ed Davies)


Shares, euro extend losses as weak China PMI aggravates mood - Reuters

A graph is seen above a worker as he puts the finishing touches to a stage decoration for an investment funds awards dinner at the Madrid stock exchange May 17, 2012. REUTERS/Paul Hanna

1 of 10. A graph is seen above a worker as he puts the finishing touches to a stage decoration for an investment funds awards dinner at the Madrid stock exchange May 17, 2012.

Credit: Reuters/Paul Hanna

TOKYO | Thu May 31, 2012 10:04pm EDT

TOKYO (Reuters) - Asian shares and the euro extended losses on Friday as China's factory activity data delivered its weakest reading this year, highlighting concerns the worsening euro zone debt crisis will further undermine global economic growth.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1 percent after ending May with a 10.9 percent slide for its worst monthly performance in eight months.

Shares in Australia .AXJO, which is highly dependent on demand from China, the world's second-largest economy, also slipped 1 percent, while the euro touched a fresh 23-month low against the dollar as the weak Chinese data dampened risk appetite.

Japan's Nikkei .N225 fell 1 percent after registering its biggest monthly drop in two years in May and was set for its worst weekly losing streak in 20 years. .T

China's official purchasing managers' index (PMI) fell to 50.4 in May, down from April's 13-month high of 53.3 and below the 52.2 forecast, the latest sign that Chinese output is cooling.

"China's data only added to the negative tone in the market as it showed the country needs to prop up its weakening domestic demand, which means demand for commodities will remain sluggish until proper measures are taken," said Naohiro Niimura, a partner at Tokyo-based research and consulting firm Market Risk Advisory Co.

The data compounded worries about Spain's banking system and the fate of Greece with the euro bloc, which strengthened a flight to quality and risk aversion flows in funds.

Investors will also be turning to data from the United States due on Friday after overnight reports showed private employers created fewer jobs than expected and a rise in new unemployment benefit claims raised concerns about the pace of the U.S. recovery.

Economists expected U.S. nonfarm payrolls, due on Friday, to rise by 150,000 jobs in May, up from 115,000 in April, while the unemployment rate likely held steady at 8.1 percent.

"Given the heightened uncertainty about the outlook for Europe and the global economy, we recommend staying defensive in FX markets," Barclays Capital analysts said in a note. They suggested positioning for a weaker euro but also trading risky currencies "tactically based on region-specific developments".

As further evidence of global deterioration, data on Thursday showed India's annual economic growth slumped in January-March to a nine-year low of 5.3 percent.

The euro fell as low as $1.2324 on Friday and hovered near an 11-1/2-year low against the yen at 96.48 hit on Thursday.

The yen eased against the dollar to 78.55 yen on Friday after rising to a 3-1/2 month high of 78.21 yen the day before on strong bids for safety.

The flight to safety lifted the dollar index .DXY, measured against a basket of major currencies, to its highest since August 2010 above 83.3 on Friday.

U.S. crude fell 0.4 percent to $86.16 a barrel on Friday after settling at the lowest close since October 20. With a 17.5 percent loss for May, U.S. crude futures marked their biggest monthly decline since December 2008.

Brent crude futures eased 0.3 percent at $101.56 on Friday after settling at its lowest finish since early October.

(Editing by Ron Popeski and Matt Driskill)


China's Official PMI Retreats to 50.4, Short of Forecast - CNBC.com

ChinaFotoPress | Getty Images


China's official purchasing managers' index (PMI) fell to 50.4 in May, the weakest reading this year and down from April's 13-month high in the latest sign that output in the world's second biggest economy is cooling.

The news sent Australian stocks and the Aussie dollar lower, as the commodity-rich country counts China as its biggest trading partner.

Economists polled by Reuters this week had expected the official PMI to retreat to 52.2 for May, from 53.3 in April.

"This data shows the speed of growth has shown some moderation, but the index has been above 50 for six months which means the growth momentum hasn't changed," the National Bureau of Statistics said in a statement accompanying the index.

"The present short term moderation in growth does not mean the Chinese economy is entering a new recession," it added.

The HSBC China Flash PMI, which gave an earlier glimpse of activity in China's vast factory sector, also retreated in May, reflecting a seventh straight month of contraction. HSBC's final May reading will be released later on Friday.

Unexpectedly weak data for April, including a 9.3 percent annual rise in factory output, the weakest pace in nearly three years, galvanized central planners into releasing a number of pro-growth measures, including accelerating project approvals and permitting private capital into sectors previously reserved to the state.

Analysts now expect China's economy will only regain momentum in the second half of this year.

China Slowdown Ripples Through Hong Kong as Retail Sales Weaken - San Francisco Chronicle

June 1 (Bloomberg) -- China's economic slowdown is rippling through Hong Kong, with the city's retail sales rising at the slowest pace since 2009 as shoppers from the mainland curb their spending.

Sales increased 11.4 percent in April from a year earlier, the government said in a statement on its website yesterday. That's the smallest annual gain since October 2009, excluding January and February numbers distorted by the Lunar New Year holiday. The median estimate in a Bloomberg News survey of economists was for a 16.4 percent increase.

China's economy is cooling as Premier Wen Jiabao extends a crackdown on speculation in the housing market and Europe's sovereign-debt crisis caps exports. In Hong Kong, declines in the benchmark Hang Seng Index since the end of February have damped confidence and demand as households see the value of their assets dwindle.

"Less extravagant spending by mainland shoppers is part of the issue," said Donna Kwok, a Hong Kong-based economist at HSBC Holdings Plc. "Local households are also being more prudent because of increasing turbulence in financial markets."

The smaller-than-estimated gain in retail sales came the same day as jewelry maker and retailer Graff Diamonds Corp. shelved a $1 billion initial public offering in Hong Kong, blaming "consistently declining stock markets."

Graff Pulled

Graff marketed its IPO amid a slowdown in luxury-goods spending in Hong Kong, where Chinese tourists splurge to take advantage of lower tax rates than in the country's mainland. Sales of jewelry, watches and valuable gifts in Hong Kong rose an average of 17 percent in the first three months of the year compared with a year earlier, according to data compiled by Bloomberg. That's down from growth of about 37 percent in the last quarter of 2011, the data show.

Hong Kong billionaire Cheng Yu Tung's worth has dropped 22 percent this year to $15.6 billion, according to data compiled by Bloomberg, as Chow Tai Fook Jewellery Co. dropped 35 percent in Hong Kong trading. Cheng's Chow Tai Fook Holding Ltd. owns 89 percent of the East Asian regional jewelry retailer, according to the data.

Hong Kong's benchmark Hang Seng Index fell 0.3 percent yesterday.

--Editor: Joshua Fellman, Ben Livesey

To contact the reporter on this story: Paul Panckhurst in Beijing at ppanckhurst@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net


Beijing Exhibiting New Assertiveness in South China Sea - New York Times

MANILA â€" In tropical waters off the coast of the Philippines, a standoff between half a dozen Chinese fishing boats, two Chinese law enforcement vessels and an aging Philippine Navy ship recently attracted a lot of attention in Washington, Beijing and other capitals across Asia.

Agence France-Presse â€" Getty Images

China National Offshore Oil Corporation’s first deep-water oil drilling rig debarking last month.

Superficially, the squabble was over some rare corals, clams and poached sharks that Philippine Navy seamen were trying to retrieve in early April from the fishing boats operating in the Scarborough Shoal of the South China Sea until two Chinese Marine Surveillance craft intervened. After two tense days, the Philippine ship â€" a refitted Coast Guard cutter sent by the United States last year to beef up its ally’s weak defenses â€" withdrew.

But the stakes were much larger, as the insistent claims ever since of sovereignty over the shoal by both the Philippine and Chinese governments made clear. The incident intensified longstanding international questions over the strategically critical, potentially energy-rich South China Sea that have become more urgent this year as the long-dominant United States and fast-growing China both seek to increase their naval power in the region.

“We’re just pawns,” said Roberto Romulo, a former foreign secretary of the Philippines who argues that China is flexing its muscles in a bid to gain unimpeded access to vast reserves of natural gas and oil believed to be buried under the South China Sea. “China is testing the United States, that’s all it is. And China is eating America’s lunch in Southeast Asia.”

More recently, a senior Chinese military officer even dismissed any legitimate role for the United States in the South China Sea. “The South China issue is not America’s business,” Gen. Ma Xiaotian, the deputy chief of general staff of the People’s Liberation Army, said in an interview broadcast Monday by Phoenix TV in Hong Kong. “It’s between China and its neighbors.”

The general’s statement appeared to throw down a challenge to the Obama administration, which has sought in the past six months to enhance United States military strength around the western Pacific and East Asia, where the South China Sea serves as an essential waterway for not only the United States Navy but also for a large portion of the world’s trade.

From placing Marines in the northern Australian port city of Darwin to increasing military relations with Vietnam, a country with an uneasy relationship with China, Washington has signaled its intention of staying, not leaving.

In the latest sign of its resolve to stand firm on Chinese assertiveness in the South China Sea, the administration sent Secretary of State Hillary Rodham Clinton and Defense Secretary Leon E. Panetta to testify last week before the Senate Foreign Relations Committee on the need for the United States to ratify the United Nations treaty that is intended to govern the world’s oceans.

China is one of 162 countries that has ratified the Law of the Sea treaty. But the United States has not done so, holding back from formal approval ever since President Ronald Reagan refused to sign it when it was completed in 1982.

A major goal of the joint appearance, administration officials said, was to strengthen the legal hand of the United States so that its navy can be assured the freedom of navigation that the treaty recognizes beyond any nation’s territorial limit of 12 nautical miles.

In contrast, Western diplomats say, China argues that freedom of navigation comes into force only 200 nautical miles from a nation’s coast, an argument that contravenes the Law of the Sea and, if put into effect, would basically render the South China Sea Beijing’s private preserve.

While China may have no interest in blocking shipping in the South China Sea, there is also no doubt that it has begun to project its power in the area. Vietnam, for example, claims that Chinese boats twice sabotaged oil exploration efforts last year by deliberately cutting ship cables in its waters. China said one of the cable-cutting incidents was accidental.

Meanwhile, China is expected to deploy its first aircraft carrier this year.

Two-thirds of the world’s natural gas trade passes through the waters of the South China Sea, according to a report by Yang Jiemian, president of the Shanghai Institutes for International Studies. The sea is the main passageway for oil from the Middle East to China, Japan, South Korea and the rest of Asia.

Now the sea itself is believed to hold a substantial reservoir of energy, with some experts predicting that under the seabed lies as much as 130 billion barrels of oil and 900 trillion cubic feet of gas.

Bree Feng contributed research from Beijing.

Understanding the China Slowdown - BusinessWeek

A sure sign of Chinese concern about their economy is the flurry of announcements about growth. China must give “more priority to maintaining growth,” Premier Wen Jiabao said on May 20. “Key infrastructure projects” will be sped up, the State Council announced on May 23. “China is making all-out efforts to encourage private investment,” reported the official Xinhua News Agency on May 28.

More stimulus for China? The last program was launched just over three years ago. “Until recently, most officials felt there was no need to do more than push down gently on the accelerator,” wrote Mark Williams, chief Asia economist at consultants Capital Economics in a May 24 note. No longer. The economy expanded 8.1 percent in the first quarter.

Credit Suisse (CS) now expects China to grow at 7 percent or less this quarter. If Greece quits the euro and China fails to deliver on stimulus, the mainland’s growth could slow to 6.4 percent this year, warned local investment bank China International Capital on May 23.

The latest stimulus could cost 2 trillion yuan ($315 billion), estimates Credit Suisse. A plan to subsidize consumer purchases of energy-efficient appliances will soon kick in, and the planning agency has approved the expansion of airport projects in the provinces of Xinjiang, Chongqing, and Sichuan.

The Chinese seem aware that the last spending spree resulted in overbuilding. “The efforts for stabilizing growth will not repeat the old ways of three years ago,” Xinhua reported on May 29.

Some economists are skeptical. “There is already massive overcapacity. But they are saying everything is going to be fine,” says Patrick Chovanec, a business professor at Tsinghua University. “That’s because the government is going to spend lots of money. Think of the moral hazard there.”

The bottom line: The Chinese government is planning up to $315 billion in stimulus spending to offset soft exports and a sagging domestic economy.

China Slowdown Ripples Through Hong Kong as Sales Weaken - Bloomberg

China’s economic slowdown is rippling through Hong Kong, with the city’s retail sales rising at the slowest pace since 2009 as shoppers from the mainland curb their spending.

Sales increased 11.4 percent in April from a year earlier, the government said in a statement on its website yesterday. That’s the smallest annual gain since October 2009, excluding January and February numbers distorted by the Lunar New Year holiday. The median estimate in a Bloomberg News survey of economists was for a 16.4 percent increase.

China’s economy is cooling as Premier Wen Jiabao extends a crackdown on speculation in the housing market and Europe’s sovereign-debt crisis caps exports. In Hong Kong, declines in the benchmark Hang Seng Index since the end of February have damped confidence and demand as households see the value of their assets dwindle.

“Less extravagant spending by mainland shoppers is part of the issue,” said Donna Kwok, a Hong Kong-based economist at HSBC Holdings Plc. (HSBA) “Local households are also being more prudent because of increasing turbulence in financial markets.”

The smaller-than-estimated gain in retail sales came the same day as jewelry maker and retailer Graff Diamonds Corp. (1306) shelved a $1 billion initial public offering in Hong Kong, blaming “consistently declining stock markets.”

Graff marketed its IPO amid a slowdown in luxury-goods spending in Hong Kong, where Chinese tourists splurge to take advantage of lower tax rates than in the country’s mainland. Sales of jewelry, watches and valuable gifts in Hong Kong rose an average of 17 percent in the first three months of the year compared with a year earlier, according to data compiled by Bloomberg. That’s down from growth of about 37 percent in the last quarter of 2011, the data show.

Hong Kong billionaire Cheng Yu Tung’s worth has dropped 22 percent this year to $15.6 billion, according to data compiled by Bloomberg, as Chow Tai Fook Jewellery Co. dropped 35 percent in Hong Kong trading. Cheng’s Chow Tai Fook Holding Ltd. owns 89 percent of the East Asian regional jewelry retailer, according to the data.

Hong Kong’s benchmark Hang Seng Index fell 0.3 percent yesterday.

To contact the reporter on this story: Paul Panckhurst in Beijing at ppanckhurst@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

China Mobile Profits From the Google Void - BusinessWeek

At the Temple of the God of the Capital in Beijing, Gao Puer sits on a bench under a tree playing poker on his Lenovo touchscreen smartphone. “I use my phone to download maps and e-books, too,” says the electrical engineer. “Most of the apps I get are free, but some of the games are worth it to pay a few yuan.” A few blocks away, Wei Xinping kills time while waiting for his girlfriend by playing Angry Birds on a handset made by Huawei Technologies. “I like to relax after work or on the weekends,” says the banker.

Both gadgets are powered by Google’s (GOOG) Android operating system, but the apps come from China Mobile (CHL). And therein lies a painful dilemma for Google. Android runs two-thirds of the smartphones sold in the world’s biggest Internet market, yet the company’s online app store, Google Play, isn’t open for business in China. Google sharply scaled back its presence on the mainland in 2010 after tussling with China’s censors. Taj Meadows, a Tokyo-based spokesman, declined to comment on why Google Play is still unavailable in China.

China Mobile, the world’s biggest phone company by subscribers, has been quick to exploit Google’s absence. The carrier launched its Mobile Market store for Android apps in 2009 and now has 158 million registered users. Customers have downloaded more than 630 million apps, making Mobile Market the world’s largest carrier-operated app store, according to Jack Kent of IHS Screen Digest (IHS). “Without having to compete with the official Google store, China Mobile has an opportunity that operators in other countries don’t have,” he says.

The success of Mobile Market comes at a welcome time for the wireless giant. Growth in subscribers has fallen by almost half in the past three years, to 10.9 percent in April from 20.9 percent in April 2009. As a result, China Mobile must now figure out ways to squeeze more revenue from each of its 673 million customers. “The reason we care about this business is that it can help drive or promote our other businesses,” says China Mobile Chief Executive Officer Li Yue. “If a developer makes a very good app, then it will help boost traffic on our network and help our growth that way.” Sales advanced 12 percent last year, to 48.4 billion yuan ($7.6 billion), at the carrier’s applications and information services division, which includes the Mobile Market store, as well as downloads of music, e-books, and video.

All Web content in China is censored, so Mobile Market doesn’t offer apps to access the blocked websites of Facebook (FB), Twitter, and YouTube. Apple’s (AAPL) Chinese-language store abides by the same restrictions. Such controls have not damped competition, according to Analysis International, which tracks 13 major app stores in China, including those operated by phone carriers and handset makers. “A couple of years ago, everyone began to realize how huge Apple’s app store was becoming and wanted into that market,” says Neil Juggins, an analyst at JI Asia Research.

China Mobile’s store is stocked with 68,663 appsâ€"just a fraction of the 450,000 available on Google Play. Mobile Market features worldwide hits such as Instagram’s photo-sharing and editing software and various iterations of Rovio Entertainment’s Angry Birds game, as well as homegrown apps such as one that provides readings on ultraviolet radiation and a game in which monkeys must capture turtles.More than 90 percent of the offerings on China Mobile’s store are paid apps, compared with 77 percent for wireless rival China Unicom (CHU) and 48 percent for Apple. Prices for games typically range from the equivalent of 50¢ to $1.50.

Mobile Market logged sales of 23 million yuan last year, a rounding error on Google’s balance sheet. (The company had revenue of $29.1 billion in 2011.) Still, China is poised to overtake the U.S. as the biggest market for smartphones this year. Based on that trend, Analysis International is forecasting an 80 percent jump in the local market for mobile applications and services, to 220 billion yuan. “Mobile Internet traffic has more than doubled in each of the past two years as smartphones get cheaper and more consumers can afford them,” says Michael Meng of BOCI Research in Hong Kong.

The bottom line: Google’s exit from the mainland in 2010 has allowed China Mobile to dominate the fast-growing market for mobile applications.

China offers to avoid trade spat as EU mulls new tactic - Reuters

Thu May 31, 2012 4:32pm EDT

* China's Commerce Minister Chen says to "exercise restraint"

* EU companies currently vulnerable to retaliation

* EU trade ministers discuss new ways to protect against dumping

By Robin Emmott and Sebastian Moffett

BRUSSELS, May 31 (Reuters) - China sought on Thursday to defuse a deepening trade conflict over accusations that it subsidises hi-tech firms exporting to Europe, as EU trade ministers met to discuss a new tactic against Chinese companies seen as trading unfairly.

Chinese Commerce Minister Chen Deming, on a visit to Brussels, said Beijing would seek to "exercise restraint in trade remedy measures", saying he wanted to see more European hi-tech exports to China.

EU Trade Commissioner Karel De Gucht, who diplomats say is considering action against China's top telecoms gear makers Huawei and ZTE Corp, said he wanted to agree "conciliatory practices" but added that China and Europe still needed to address their differences.

"It is very important that China and the EU address the problem of advanced technologies and how we handle this, and it is not limited to telecoms," De Gucht told a news conference, flanked by Chen.

"There is a problem and either we resolve it together or sooner or later it will end up in trade defence instruments," De Gucht said, referring to measures to counter subsidies and imports sold at artificially low prices.

"It will be very important to agree conciliatory practices," he said.

The EU executive thinks Huawei and ZTE receive illegal state subsidies to undercut rivals in Europe - an accusation the two companies deny.

Chen declined to comment on the case, but said he was ready to "work together with Europe and advance cooperation".

The EU has stepped up its fight against what it sees as unfair trade practices, challenging Chinese subsidies to makers of glossy paper and looking into complaints of cheap credit to Chinese firms.

In the case of Huawei and ZTE, the accusation is that their low prices hurt European equipment suppliers such as Alcatel-Lucent and Nokia-Siemens Networks.

The United States has also taken action against China, imposing punitive import duties on a number of Chinese products - including solar panels and steel products - that it believes are unfairly priced or subsidised.

GOING "EX OFFICIO"

EU trade ministers met De Gucht earlier on Thursday to sound out support for possible use of a new tactic by the EU executive against Chinese companies accused of unfair trading.

Many European companies would like protection from Chinese imports sold onto the EU market at what they consider artificially low prices. But they fear that, if they start their own industry complaints, they will be vulnerable to retaliation from the Chinese government, which could hamper their business in an increasingly important market.

De Gucht said that the Commission might in future launch cases on its own initiative, so that no foreign government could blame a European company for launching a case.

"I am considering the use of 'ex officio', which means the Commission launches trade defence cases by itself," he told a news conference after the trade ministers' meeting, without specifically relating the measure to China.

Though the Commission has the authority to launch its own investigation, diplomats and officials say political support from member states would give the move more legitimacy at a time of delicate relations with China.

"A political mandate would mean a great deal," said one EU official who declined to be named.

But Chen's visit highlighted the sensitive nature of the lucrative relationship.

At a time when European economies are stagnating, damaged by the continent's public debt crisis, exports are one of the few sources of growth.

EU trade with China is booming and bilateral commerce is expected to reach a record high of 500 billion euros ($620 billion) this year. China is the EU's second biggest trading partner after the United States. The bloc is China's biggest.

De Gucht has said the aim of the initiative was to get round companies' fear of retaliation in countries, such as China, that practice "state capitalism" - close government control of privately-owned business.

"I have a responsibility and I have the duty towards European businesses to defend their interests in the light of unfair trade practices," he said.

But a confrontational relationship with China might hurt the long-term prospects of European companies in a promising future market, while defence against Chinese companies in Europe might not boost European businesses much.

"The problems that European companies are facing are not problems of the European market," said Fredrik Erixon, director of the European Centre for International Political Economy, a Brussels-based think-tank. "The problems facing European firms are predominantly inside China."


China's Bank Opening Fails to Inspire - Wall Street Journal

SHANGHAIâ€"China's pledge to give private capital real access to the nation's lucrative banking sector has triggered more skepticism than excitement, with analysts saying entry barriers remain firmly in place.

As part of Beijing's broad campaign to boost a slowing economy, government arms from the railways ministry to the banking and securities regulators have unveiled measures aimed at encouraging more investment by private businesses in sectors traditionally dominated by the state.

The bank regulator's steps include allowing private firms to own more than 20% of a regional lender, permitting microfinancing firms to be restructured into banks and lowering the threshold for setting up rural banks.

Although China's state media cheered the measures as a crucial step in breaking the state's near-monopoly in banking, private entrepreneurs and financial experts were less enthusiastic.

"The so-called reform doesn't include anything substantial," said Joe Zhang, head of Wansui Microloan Co., a microfinancing firm based in the southern province of Guangdong.

Mr. Zhang, formerly managing director of UBS AG's China operations, said any attempt to revamp a microfinancing company into a bank will surely meet strong headwinds.

Fang Peilin, owner of a credit-guarantee company in Wenzhou, an eastern Chinese city with a reputation for fostering private entrepreneurship, said the bulk of the reform measures in fact reiterate existing rules, and the criteria for private capital to buy into a bank remain stringent.

For example, Mr. Fang said, regulations for transforming a microfinancing firm into a bank have been in place since June 2009â€"and there hasn't yet been a single successful case.

"The bar is still very high for private capital," said an executive at a midsize Chinese bank. "Banks would prefer partners with which they have an existing relationship rather than some little-known private fund."

The timing of the declared reformsâ€"during an economic slowdownâ€"has some analysts and entrepreneurs wondering whether the government's real intention is to get private businesses to bail out troubled state enterprises or provide a lifeline to cash-strapped sectors like the railways and hospitals.

The rules on investment in city commercial banks or rural credit cooperative make it sound that way: Private companies looking to own a stake of more than 20% must agree to help the bank or cooperative restructure and dispose of bad assets, the China Banking Regulatory Commission said.

"The CBRC measures will do little to correct the fundamental problems in China's financial system, such as the [state] monopoly and the funding difficulties faced by small businesses," said Yi Xianrong, a researcher with the Institute of Finance and Banking under the Chinese Academy of Social Sciences.

Indeed, in Zhejiang, the province where Wenzhou is located, private capital has already achieved dominance in certain segments of the banking sector, but this has done little to ease the funding difficulties faced by small businesses. According to CBRC data, at the end of 2011 private ownership in the province's 10 city commercial banks and 112 rural financial institutions stood at 76% and 97%, respectively. Still, a decline in global demand and surge in rates in the unofficial "gray market" lending system last year led to a string of business failures in the province, prompting dozens of business owners to flee.

"I don't think the introduction of private capital will boost the efficiency of the financial system as long as China maintains its grip on interest rates and continues to impose administrative limits on bank lending," said Mr. Yi.

And giving private capital greater access to the banking system, he added, is likely to increase the level of risk in the financial sector.

"Some private investors are likely to take advantage of regulatory loopholes to conduct speculative businesses," he said. "Are the regulators ready for that?"

â€"Rose Yu and Yue Li

China eyes wide open spaces - Sydney Morning Herald

China eyes wide open spaces

Lauren Quaintance June 01, 2012

CHINA would invest billions of dollars to transform vast tracts of undeveloped land in northern Australia for farming, under a plan confirmed yesterday by the federal government.

But opponents said an ''Asia food bowl'' would come at the expense of giving Australians access to affordable, good-quality food.

Trade and Competitiveness Minister Craig Emerson confirmed that the government was undertaking a joint study with Beijing to examine the policy changes needed for a massive investment by Chinese agricultural interests.

Dr Emerson has denied that this means there are plans to ''buy up the farm'' and use imported labour to produce food for the voracious Chinese market, with its 1.3 billion citizens. ''It is designed to lift Australian food production for world markets,'' he said.

The revelation, in advance of an official report expected midyear, has caused some consternation in Canberra, where foreign ownership of Australian farmland is a hot-button issue.

More below

Nationals senator Barnaby Joyce, who recently pushed for tougher restrictions on foreign ownership of land in a move that was seen as breaking ranks with the Liberals, said that the report would raise hackles in urban as well as regional areas across Australia.

''There is a strong concern in the Australian public about ownership of their farmland and it has a deeper philosophical vein to it than many other things,'' he said. ''It is not only a concern for regional people - it is reflected very, very strongly in urban constituencies.''

While the move by the Chinese was ''astute'', he said it exposed the lack of planning for our own food security since Australia was now a net importer of food and the resulting inflation had an impact on food prices.

''It's not that you'll run out of food, it's the form of food that you'll be able to buy, and that is happening right now. How often do you see people who in the past bought the roast, now buy mince? Why? Because they can't afford the roast, but that was once a staple.''

The question of selling Australian land to a foreign state-owned enterprise could also have troubling implications, according to Senator Joyce.

More below

''It is held by an organ of the government, and governments, especially strong ones like the Chinese, don't go broke - therefore they can hold [the land] in perpetuity,'' he said.

Joyce denied his views were xenophobic. ''Look at any other country and see what their controls of [foreign] investment are like and then compare it to ours and you'll see you can't buy [land] in China, you can't buy it in Japan, you can't buy it in South Korea, you're struggling to buy in the United States and there are vastly greater controls with buying it in New Zealand.''

Liberal senator Bill Heffernan said Australians were either ''too bloody tired or too bloody lazy'' to develop the land to ensure our own future. ''I think it's time that all Australians sat up and took notice,'' he said.

While northern Australia has millions of hectares of underutilised land - as well as abundant water and good proximity to Asia - obstacles to development have included poor transport links and a difficult climate.

Until now, the Chinese have focused on opening up farmland in South America and Africa to meet the demands of the burgeoning Chinese middle class. They are expected to continue to focus on wheat and rice production on the mainland while looking for new sources to meet their increasing needs for beef, sheep, sugar and dairy.

It is the consumption of meat, in particular, that tells the story of the food needs of the world's most populous nation (see graphic).

More than a quarter of all meat produced worldwide is now eaten in China. In 1978, China's annual consumption of meat was 8 million tonnes - it is now 71 million tonnes and more than twice that of the United States.

St. Augustine in Beijing - Wall Street Journal

Less than three months ago, Beijing announced a new 7.5% growth target, signaling its willingness to tolerate a slowdown for the sake of necessary reforms. Those were the days. Over the past week it has become clear that China's planners have loosened their purse strings, although not to the extent beleaguered investors had hoped. Apparently the Communist Party is losing its nerve.

Today's stimulus is a pale shade of the 2008 version. The government is expected to sanction projects worth up to two trillion yuan ($315 billion). That compares to the estimated 20 trillion yuan in central- and local-government spending and politically allocated bank credit Beijing used to keep China from succumbing to the global crisis four years ago.

The National Development and Reform Commission has accelerated approval of infrastructure projects, and the government will invest in several favored industriesâ€"such as pouring $20 billion into new steel plants despite current chronic overcapacity in the steel industry. Local governments are expected to adopt measures such as subsidies and tax credits for property buyers to buoy a sinking real-estate market. In a sure sign of desperation, Beijing also plans to revive its cash-for-clunkers program to encourage people to trade in old cars for new ones, and it will roll out subsidies to buy household appliances.

Beijing's desire to do something is understandable, given a steady flow of bad news. Industrial production is growing at the slowest pace in three years and HSBC's survey of business confidence finds managers increasingly pessimistic. Electricity consumption, a reliable proxy for more easily fudged growth numbers, has been flat. Exports face uncertainty in both a tottering Europe and a sluggish U.S. With a once-a-decade leadership transition due later this year, there is less appetite than usual in the government for disruptive economic change.

Tiffany stained-glass window of St. Augustine, in the Lightner Museum, St. Augustine, Florida.

But with the economy still struggling to absorb the last stimulus, this one is likely to have a smaller marginal effect even than its smaller size might suggest. Neither spending plan addresses the basic imbalance in favor of investment and exports and against consumption. You can gain only so much from building ever more roads, bridges, airports and hydroelectric plants if there isn't sufficient underlying economic activity to create users for those public works.

This is exactly why the 2008 stimulus is now regarded as a waste of money, even among some Chinese leaders. That building binge, which caused investment to surge to 49% of GDP as of last year, has never produced the knock-on economic activity boosters in China and the West predicted. Instead, white elephant projects sit idle. Bad loans accumulate on the books of the banks that financed the construction as anticipated revenue streams for the borrowers (whether from corporate profits or in the form of increased tax revenues spurred by growth) don't materialize.

Now Beijing is hoping to do a little bit more of the same. It's telling that even those elements of the stimulus program that look like they're targeted at boosting household consumption have an industrial-policy edge: Beijing is trying to steer yuan to manufactured goods such as autos, washers and energy-efficient lighting whose producers have previously benefited from incentives.

Wages did rise slightly as a share of GDP last year, an encouraging sign. But there is little talk of raising bank deposit rates or other steps that would distribute money away from the government-industrial complex into individual hands. Doing so would simply be too difficult politically on the eve of a leadership transition. Beijing can't afford the slower growth that would inevitably result during a genuine rebalancing. And the regime is too dependent on the support of state-owned enterprises and others that benefit from the current system.

Staying the course, including the mild stimulus, might work for now if "working" means producing a respectable GDP growth figure. By definition, government spending and investment are part of output. But given the mothballs already accumulating on the previous stimulus's projects, no one should expect the latest round to induce durable growth over the longer term. The Party's goal seems to be to keep the headline growth number sufficiently high to quell popular dissatisfaction for the rest of the year.

***

This is a teachable moment for the West's China-besotted commentators. The country's leaders too often win kudos for their "far sightedness" in setting economic policyâ€"their ability to build roads and bridges, and the alleged care with which they formulate orderly central plans. The current slowdown exposes how false this view is. Confronted with a choice between short-term political gain and longer-term economic progress, China's leaders continue to take the easy way out.

China urges World to give Annan's Syria plan time - Day Press News

BEIJING- China on Thursday urged the world to give UN-Arab League envoy Kofi Annan's peace plan for Syria more time to work, saying there could not be instant solutions to such a complex crisis.

"China believes that the situation in Syria currently is certainly very complex and serious," Foreign Ministry spokesman Liu Weimin told a daily news briefing.

"But at the same time, we believe that Annan's mediation efforts have been effective and we ought to have even more faith in him and give him more support," he added.

"... It is a problem that has been brewing for quite some time now, and its resolution needs a certain amount of time. I do not think that Annan's mediation efforts will be all plain sailing, and there will be reversals and complications."

China has repeatedly voiced fears that more forceful international intervention in Syria could exacerbate the violence, or open the way for Western-led regime change.

On Wednesday, Chinese Foreign Ministry Spokesperson Liu Weimin reiterated his county's stance which rejects military intervention in the Syrian internal affairs, pointing out that Beijing rejects using force to bring about change in Syria.

Russia Today website quoted Weimin as calling for the necessity of investigating al-Houla events, hoping that the visit of the UN envoy to Syria, Kofi Annan, would help ease the tension and push all parties to implement the peace plan.

The latest violence emphasized how the peace plan drafted by Annan has failed to stem 15 months of bloodshed or bring the Syrian government and opposition to the negotiating table.

Despite the diplomatic deadlock, Annan is pressing on with his mission.

Outrage at last Friday's massacre in the town of Houla prompted several Western countries to expel senior Syrian diplomats and to press Russia and China to agree to tougher action by the UN Security Council.

Beijing and Moscow have both vetoed two Security Council resolutions calling for tougher action against Damascus, while stressing hopes for a political solution brokered by Annan, the former UN Secretary-General.
--

China Detains Hundreds After Tibet Immolations - Voice of America

Chinese police reportedly have detained hundreds of people as part of a security lockdown in the Tibetan capital, Lhasa, after two people set themselves on fire there earlier this week to protest Chinese rule.

The U.S. government-backed Radio Free Asia cited a local source late Wednesday as saying that Chinese authorities have locked up about 600 Tibetan residents.  It said many others from outside the Tibetan Autonomous Region have been expelled.

On Sunday, two young men set themselves on fire outside Lhasa's famous Jokhang Temple, in the first such incident to take place in the heavily guarded Tibetan capital.  State media say one of the protesters died at the scene, while the other was hospitalized.

The crackdown comes as exile groups reported Wednesday that a mother of three young children in a largely Tibetan area of southwestern China died after setting herself on fire, in an another apparent protest against Chinese rule.

The protester, identified as Rikyo, 33, died in front of the Jonang Dzamthang monastery in a prefecture known by Tibetans as Ngaba and located in Sichuan Province.  

The head of the Jonang Welfare Association, Tsangyang Gyatso, says the protester was a neighbor of three young Tibetans who set themselves on fire earlier this year while demanding the safe return of their exiled spiritual leader, the Dalai Lama.

Tibet Immolation Map

​​Anti-China protests have rocked southwestern China and neighboring Tibet for the past 14 months, as Buddhist monks, nuns and their supporters push their demands for freedom and the return of the Dalai Lama.

John Powers, a professor of Asian studies at Australian National University says that many Tibetans feel the self-immolations are necessary because an unofficial state of martial law in their region has restricted other ways of expressing dissatisfaction.

"The Chinese state has upped the level of oppression so much that now it's really only possible to stage individual protests, and that's one of the reasons why these very public, very dramatic self-immolations are taking place - because the Tibetans really have no other options," Powers said.

China says the immolations incite separatism and are directed from outside the country.  But representatives of the Dalai Lama, who lives in northern India, say protesters are driven to self-immolate in large part because they can no longer tolerate Beijing's ongoing push against Tibetan culture and religion.

This week's immolations follow a new Chinese move to ban Tibetan Buddhists, including current and former government officials, students, and party members, from engaging in religious practices during the sacred month of Saka Dawa, which began May 21.  Saka Dawa commemorates the Buddha's birth, enlightenment and death.

Shanghai owner fields himself alongside Anelka - Chicago Tribune

Zhu Jun, owner of Shanghai Shenhua football club, reacts after missing a goal during a friendly match against Argentina CN Sports in Shanghai

Zhu Jun, owner of Shanghai Shenhua football club, reacts after missing a goal during a friendly match against Argentina CN Sports in Shanghai (CARLOS BARRIA, REUTERS / May 31, 2012)


SHANGHAI (Reuters) - Shanghai Shenhua's flamboyant owner Zhu Jun fielded himself alongside striker Nicolas Anelka during a friendly match on Thursday.

The 45-year-old Chinese internet tycoon donned the number 11 jersey and played for the first half of the game against Argentina CN Sports Football Club in a frontline partnership with Anelka.

Zhu stole the limelight from newly appointed head coach Sergio Batista, the former Argentina manager who did not take charge of the game and instead chose to watch from the terraces.

The partnership with former France international Anelka ended when Zhu was substituted at halftime after missing some good chances.

The game ended 1-1 with Anelka having a penalty saved in the second half.

Batista was appointed head coach on a six-month deal on Wednesday to replace sacked Frenchman Jean Tigana.

Batista wants to sign Chelsea's Ivorian striker Didier Drogba, who helped the London club win the Champions League, but Zhu remained tight-lipped when asked whether he was confident on Drogba's transfer to his club.

"That is a good question. But I won't tell you today," he said.

Shanghai, who are ninth in the Chinese Super League, fired Tigana in April after a poor start to the season and replaced him with interim coach Jean-Florent Ibenge.

Batista will formally take charge of the side in a friendly against South African side Moroka Swallows on Sunday.

Chinese clubs have splashed out on big name foreign managers and players to try to raise the profile of domestic soccer.

League leaders Guangzhou Evergrande this month appointed Italy's former World Cup-winning coach Marcello Lippi after sacking South Korean Lee Jang-soo.

(Editing by Alan Baldwin)

China Stocks Seen Rising 15% by Goldman Partner on Growth - San Francisco Chronicle

(Updates with closing prices throughout.)

May 31 (Bloomberg) -- While the Chinese government is vowing not to spend as it did during the 2008 global financial crisis, the most accurate analysts say the benchmark index for the nation's stocks will keep rising.

The Shanghai Composite Index is poised to gain 15 percent from yesterday's close to 2,750 by year-end as slowing inflation allows the government to loosen monetary policy and banks to lend more to companies, according to Beijing Gao Hua Securities Co., Goldman Sachs Group Inc.'s partner in China and the firm with the most correct predictions for yuan-denominated A shares in the two years to January 2012, based on Bloomberg Rankings.

The benchmark stock index has climbed 7.9 percent this year on speculation the government will accelerate measures to boost the world's second-biggest economy after gross domestic product grew at the slowest quarterly pace since 2009. The government said on May 29 it has no plan to introduce stimulus on the scale of measures in 2008, when policy makers unveiled a fiscal package of 4 trillion yuan ($629 billion).

"We remain positive on the market this year," Wang Hanfeng, China strategist at Gao Hua, said in an e-mailed response to questions. "With inflation easing, there is a shift towards policy loosening which will help improve the liquidity situation and support the valuation expansion of A shares."

Slowing inflation leaves room for the government to stimulate the economy as policy makers turn their attention to growth, said Wang. A statistics bureau report on May 11 showed China's consumer prices rose 3.4 percent in April, below the 3.6 percent rate in March and the government's full-year target of 4 percent. The economy grew 8.1 percent in the first quarter, the least since the three months ending June 30, 2009.

Brokerage Targets

The Shanghai Composite slipped 0.5 percent to 2,372.23 at today's close. It lost 1 percent this month, compared with a 13 percent plunge in Brazil's Bovespa Index, the 6.7 percent drop for the BSE India Sensitive Index and the 11 percent slump in Russia's Micex Index.

Gao Hua's stock recommendations on Zoomlion Heavy Industry Science & Technology Co. and Poly Real Estate Group Co. were the most accurate based on an analysis of recommendations on 135 A shares from more than 400 analysts at 43 brokerages. The analysts were ranked according to the accuracy of their estimates between Jan. 1, 2010 and Jan. 9, 2012.

Most Accurate

Gao Hua had the highest accuracy rate at 60 percent with 55 correct recommendations out of 88, followed by Capital Securities Corp. and UBS AG, according to Bloomberg Rankings. Masterlink Securities Corp., Morgan Stanley, China International Capital Corp., HuaChuang Securities, JPMorgan Chase & Co., Credit Suisse Group AG and Deutsche Bank AG rounded out the top 10 brokerages.

Morgan Stanley Huaxin Securities Co., based in Shanghai, said on April 24 that the Chinese index may rally another 30 percent this year, led by banks and developers. Guotai Junan Securities Co., also located in Shanghai, forecasts the gauge may hit 2,800 by the end of the second quarter. Morgan Stanley and Guotai Junan advised buying stocks before the Shanghai gauge's last bear market ended in July 2010.

Wang has an overweight allocation for stocks in the insurance, property and construction material industries, suggesting investors should hold more of the shares than are represented in benchmark indexes. Gaohua cut the coal industry to neutral from overweight, he said.

Index Valuations


Arabs urge China to apply more pressure on Syria - Reuters

HAMMAMET, Tunisia | Thu May 31, 2012 7:57am EDT

HAMMAMET, Tunisia (Reuters) - Senior Arab officials pressed China on Thursday to use its influence to help stop the violence in Syria.

China, along with Russia, has blocked efforts to take more robust action against Syrian President Bashar al-Assad in the United Nations Security Council, but pressure for a firm response has grown since the massacre last week of over 100 people in the town of Houla.

"We greatly respect the efforts of China to find a solution in Syria," Kuwaiti Foreign Minister Sheikh Sabah Khaled al-Sabah said on the sidelines of an Arab-China cooperation forum in the Tunisian town of Hammamet.

"But we hope it will redouble this effort to stop the machine of violence and death and to put more pressure on the Syrian government to respect its commitments under the Annan plan," he said, referring to a peace plan proposed by U.N.-Arab League mediator Kofi Annan.

The forum in Hammamet, a resort on the Mediterranean coast, was attended by Chinese Foreign Minister Yang Jiechi, and Arab delegates used the opportunity to lobby him over Syria.

In a speech, he made no reference to Syria. A Chinese foreign ministry spokesman in Beijing deflected calls for firmer action by saying Annan's mediation efforts should be given more time to work.

Tunisian President Moncef Marzouki, a former political prisoner swept to power in last year's "Arab Spring" revolution, said inaction could lead eventually to foreign military intervention in Syria, something which Russia and China oppose.

"China could play a decisive role in halting the suffering of the Syrian people and closing off the option of military intervention, by pushing for a scenario similar to the one in Yemen," Marzouki said in a speech to the forum.

Like Syria, Yemen saw a wave of protests inspired by the "Arab Spring." A negotiated solution was found under which President Ali Abdullah Saleh, in power for 33 years, stepped down in February.

The massacre in Houla of 108 people, including women and children, caused widespread outrage. Western states expelled senior Syrian diplomats, but any decisive response through the U.N. is still stymied by the Russia and Chinese vetoes.

U.N. peacekeepers said the Syrian army and militiamen supporting Assad were probably responsible for killing the victims in Houla with artillery and tank fire, guns and knives.

The government denied any responsibility and blamed Islamist "terrorists" - its term for rebel forces.

At Thursday's forum in Tunisia, Arab League chief Nabil Elaraby urged all sides to implement the Annan peace plan, which envisages a ceasefire, the withdrawal of heavy weapons from towns and cities, and talks on a political transition.

"We insist that the violence and massacres stop immediately," Elaraby said. "We hope that all parties will help Annan's efforts."

(Writing by Christian Lowe; Editing by Louise Ireland)