China raises interest rates 4th time in 2007 to curb inflation

China's central bank raised the benchmark interest rates on Tuesday for the fourth time this year in an effort to prevent the economy from overheating and curb accelerating inflation.

The one-year deposit rate will increase 27 basis points to 3.60 percent, while one-year lending rate will rise by 18 basis points to 7.02 percent, effective on Wednesday, the People's Bank of China said in a statement on its website.

The increase is aimed at better steering bank credit and stabilizing inflation expectation, according to the statement.
The timing is somewhat of a surprise as the central bank usually announces interest rate changes during the weekend in the past. However, the latest hike is not totally unexpected given mounting concerns about overheating economy and accelerating inflation.

China's gross domestic product grew 11.9 percent in the second quarter this year, the fastest recorded in a decade.

In July, the trade surplus rose 67 percent from a year earlier to $24.4 billion, the second-highest monthly total, and the money supply climbed 18.5 percent, the biggest increase in more than a year.

Fixed-asset investment in urban areas increased 26.6 percent in the first seven months from a year earlier, close to the 26.7 expansion in the first half.

The Consumer Price Index, a barometer of inflation, jumped by a 10-year-high 5.6 percent in July, well above the official target of 3.0 percent.

The inflation rate is also higher than the deposit rate, indicating a loss of purchasing power if people put their money into banks.

The low interest rate policy has somewhat encouraged an exodus of bank savings to the country's skyrocketing stock market, which has soared more than 80 percent so far this year on top of a 130 percent rally in 2006.


(source: chinadaily.com.cn)

Individuals Allowed to Buy Overseas Shares

Mainland residents will, for the first time, be allowed to directly invest in overseas securities under a pilot program to be launched in the northern port city of Tianjin.

Investors can use their foreign exchange or purchase foreign currency to open an account with Bank of China's Tianjin branch or Bank of China International Securities in Hong Kong, according to a statement on the State Administration of Foreign Exchange (SAFE) website yesterday.

The investment amount will not be subject to the annual limit of US$50,000 for an individual to purchase foreign exchange, as per earlier rules.

"This is part of the process of China's capital account reform," Chen Jijun, analyst with Beijing-based CITIC Securities, told China Daily. "It will help ease liquidity pressure in the country as foreign exchange reserves pile up rapidly," Chen said.

Stephen Green, senior economist with Standard Chartered Bank (China), described it as "a historic move in China's capital account opening".

SAFE said in the statement: "This is an important measure to widen the channels for foreign exchange outflows and promote basic balance in international payments."

Individuals were earlier allowed to invest overseas indirectly through banks, brokerages, insurers and fund managers through the qualified domestic institutional investors (QDII) scheme.

Analysts said the Hong Kong market will be the first to benefit as many mainlanders are likely to buy stocks of mainland companies listed there.

"The policy will surely be welcomed by Hong Kong investors, because mainland investors' participation will help boost confidence as well as market sentiment," said Paul Lee, banking and insurance analyst at Hong Kong-based Taifook Securities.

Lee said the mainland will benefit too, as capital diverted from the A-share market will help "prevent over-heating" and "relieve pressure for the yuan to rise".

(Source: China Daily August 21, 2007)

List of foreign share call warrants

These CWs with low premiums are worth looking at:

1) CCCC-C1 RM0.13, underlying share price HKD13.94, premium 5.05%

2) CHMOBIL-C1 RM0.065, underlying share price HKD81.00, premium 2.87%

3) HKEX-C1 RM1.10, underlying share price HKD106.30, premium 0.34%

4) ICBC-C3 RM0.045, underlying share price HKD4.26, premium 5.37%

List of HK call warrants sorted by premium

Here is an updated list of Hong Kong call warrants sorted from the lowest premium to the highest. As you can see from the list, CCCC-C1 is having the lowest premium of 0.27% which is nearly at par with its underlying share's value. The lower the premium, the better (or cheaper) the CW is. CWs with longer expiry period usually have a higher premium compared to the ones which are close to expiry (This is also referred to as the time value).

The orange column shows the theoretical price of the underlying share using current CW price at zero percent premium.
CCCC-C1 with the lowest premium (0.27%) only needs its underlying share price to move up by 4 cents (15.62 - 15.58) to be at par value.
On the other hand, CCCC-C3 which is having the highest premium (24.93%) would need a 3.88 HKD (19.46 - 15.58) increase on CCCC's share price.

At current market condition, a premium of 5% to 10% would be considered fair.

The average premium of all the CWs is 8.58%. This can be used as the benchmark.

Greater China Stockmarket Summary(09/08/07)

BEIJING (XFN-ASIA) - A summary of Greater China stockmarket trading Thursday:
HONG KONG
Share prices closed lower as caution re-emerged in late trade following news that French bank BNP Paribas and a US-German joint venture financial institution have been caught up in problems in the US subprime mortgage market. Stocks had advanced significantly, but trading changed course when the news about BNP hit the market, wiping out the day's gains. Some hedge funds reduced their portfolios in Hong Kong to meet possible redemption demands, while other investors locked in profit from recent gains amid fears of more volatility in the global equity markets. The Hang Seng index closed down 97.31 points or 0.43 pct at 22,439.36.

CHINA
China closed higher, driving the composite index to another record for the fifth straight trading day(tak boleh tahan man!), as investors continued to build positions in financial stocks. Steelmakers rebounded from yesterday's weakness as investors were also upbeat about the sector on prospects of industry consolidation and after Wuhan Iron and Steel reported a 171 pct rise in firsthalf net profit. The benchmark Shanghai Composite Index, which covers both A- and B-shares listed on the Shanghai Stock Exchange, closed up 90.93 points or 1.95 pct at a record 4,754.10. The Shanghai A-share Index was up 95. 61 points or 1.95 pct at 4,989.19 and the Shenzhen A-share Index was up 21.21 points or 1.53 pct at 1,411.23. China B-shares closed higher, led by machinery and property stocks following strong gains in their A-share peers. The Shanghai B-share Index was up 4.57 points or 1.45 pct at 320.41 and the Shenzhen B-share Index up 7.25 points or 0.92 pct at 792.12.

New listing: PBBANK-CD, TENAGA-CF, CCCC-C2, CCCC-C3, HKEX-C3

With Public Bank's share price closing at RM9.70, PBBANK-CD is currently having a premium of 13.40%. Tenaga which closed at RM10.90, would give its cw TENAGA-CF a premium of 14.68%. Since the market has been quite weak lately, a possible gain of one or two cents would do good.

China Communication Construction Corporation (1800) closed at HKD15.52;
CCCC-C2 ---> 11.08% premium.
CCCC-C3 ---> 37.85% premium.

Hong Kong Exchange (0388) closed at HKD125.40;
HKEX-C3 ---> 27.87% premium.

CCCC-C3 and HKEX-C3 are both at extremely high premiums. At the current CW prices, the underlying shares (CCCC and HKEX) should trade above HKD 21.40 and HKD160.30, respectively. Well, that's a long way to go.
Since call warrants have limited life span, it may not wise to hold them at this level.
Both CWs will be traded on the negative side tomorrow.



Time to cover some losses:

For those who have subscribed for CCCC-C3, you can dispose the C3's and swap to C1's.
At present, CCCC-C1 is only having a premium of 1.09%. And if the underlying share price was to move up 5% (+78 cents) from HKD15.52 to HKD16.30, its CW should be valued at RM0.275 (more than 24% gain).

Another CW that is worth taking a look is ICBC-C3, which is currently at 2.58% premium.
A 5% increase (+24 cents) on the underlying share price from HKD4.72 to HKD4.96 can lift the CW's price to RM0.13 (+24% gain).

China Mobil "A" rating affirmed.

China Mobile 'A' rating affirmed; outlook stable - Fitch Ratings 2007-8-8 06:26:00 p.m. HKT, XFNA

- BEIJING (XFN-ASIA) - Fitch Ratings maintained its long-term foreign currency issuer default rating on China Mobile Ltd at ""A"", with the outlook ""stable."" The ratings agency said the rating action reflects the company's ""strong operating performance and solid financial profile."" Fitch noted that China Mobile has consistently generated positive free cash flow, enabling it to maintain a net cash position with ""robust"" financial ratios. It also said China Mobile maintains a dominant market position in the country's mobile sector, despite intense competition, and that the company has registered strong subscriber growth while increasing its market share to over 65 pct. Compared to rival China Unicom, the company registers higher minutes of usage and average revenue per user. The rating also reflects the strong growth potential for China's mobile telecom sector, where penetration is still relatively low at around 38 pct, Fitch said. At the close of today's trade in Hong Kong where it is listed, China Mobile Ltd was up 3.15 hkd, or 3.671 pct, at 88.95 hkd.