mOn TH in REViEW
bA nking & finA nCE
A GEM for SMEs
Shenzhen’s small-cap board opens
amid a tiring IPo market
C
hina’s efforts to been raised that the new
Imaginechina
CHinESE ExPORTS:
alleviate shortcom- market will draw funds
Decline is slowing
ings in its capital away from the main boards.
distribution will be brought Market watchers believe
ECOnOmi CS to bear with the launch of these fears are premature.
the long-awaited Growth “Some people are wor-
Getting better? Enterprise Market (GEM)
in Shenzhen.
The NASDAQ-style
ried over the GEM’s influ-
ence on the cash distribu-
tion in China’s initial public
board is geared to allow offering (IPO) market,”
New data show trade is less worse small- and medium-sized said Yu Xuhui , an analyst
enterprises (SMEs) to tap at brokerage Shenyin &
D
ata released in base against which they will the country’s capital mar- Wanguo. “But we don’t
October seemed to be measured. In November kets. Many of these firms believe the new board will
indicate some respite 2008, exports slowed 2.2% have traditionally struggled have any wider effect, as the
from the year’s dismal trade year-on-year, from 19.2% to fulfill their potential transaction volumes will
news. September exports fell growth the month before. as banks prefer to lend to still be very small compared
15.2% year-on-year, the slow- Still, third-quarter export state-owned enterprises. to the main bourses.”
est decrease in nine months. growth was higher than in However, concerns have As Jing Ulrich, chair-
Imports fell by 3.5%. While the previous quarter, support-
still negative, economists said ing the idea that exports are
the data suggested the export warming, said Wang. AuTOS
environment might be grow- Gradual improvements
ing less hostile.
“In exports, the worst is
over. It has started to improve
have been helped along by
Beijing’s intervention
in currency valua-
Speeding up
at the margin sequentially,” tions, which has seen
said Wang Tao, chief China the renminbi weaken Tax breaks are still driving auto sales
economist at UBS. alongside the US
Some analysts cautioned dollar against the euro.
C
against reading too much However, economists ar sales in China are on a roll. A total of
into the figures, however. A say currency fluctuations 1.33 million units were cleared in Septem-
lack of seasonal adjustment take some time to trickle ber, making it seven months in a row that
makes focusing on a single through, and are less im- sales have topped 1.1 million. China is
monthly number problem- portant than fundamen- now comfortably the number
atic; one-off factors such tal demand. A real re- one car market world-
as holiday timing can have covery in exports will wide. Sales for the
a material affect on data. therefore require a first nine
Merrill Lynch economists recovery in global
Lu Ting, T.J. Bond and Zhi markets.
Xiaojia wrote in a recent note Encourag-
that, adjusted for an extra two ingly on this
working days this September, front, China’s
export and import growth in shipments to
September came in at -20.1% the US were
and -11.4%, respectively. up a seasonally
After a shorter October, adjusted 12.6% in
November’s monthly trade the third quarter,
figures are also likely to be while shipments to
distorted due to the very low the EU rose 22.1%.
10 China Economic Review • November 2009
gEELy: Wants to buy Volvo

man of China equities at J.P. Morgan, 10 months, saw its A-share price rise
noted, the first 10 companies approved by 28% as it debuted on September
to list on the GEM board aim to raise a 25 compared with an average first-day
combined US$1.01 billion – a fraction gain of 68% for the some 22 other
of China’s average monthly IPO fund- companies that listed in China since
raising in the third quarter of 2009. June. A day earlier, MCC’s H-share
However, despite a summer of debut also fell flat, with the stock price
sizzling IPOs, recent listings have been falling 13% from its opening level.
given a cooler reception, both domesti- Investor confidence may be
cally and in Hong Kong. Metallurgi- evaporating as expectation mounts that
cal Corp of China (MCC), the first the central bank will rein in lending.
company approved for a dual listing in Yet according to the People’s Bank of
China, new loans issued in September
stood at US$75.6 billion, up from
US$60 billion in August.
Although Ulrich believes Beijing
has shifted from an “ultra-easy” credit
policy to “accommodative policies
aimed at achieving more sustainable
growth,” she still says concerns about
policy tightening are “overdone.”
Time will tell whether investors
will maintain strong interest in new
offerings on Shenzhen’s GEM. Any
cooling in sentiment should be seen
in relative terms: IPOs in China and
Hong Kong have amounted to US$25
Phototex
billion so far this year, representing half
STiLL kEEn? IPO demand is weakening the total funds raised globally.
months of the year reached 9.66 million equity fund, to expand its production
vehicles, compared with 7.8 million in facilities and to build up its brands.
the US, the world number two. Geely is also eyeing General Motors’
Analysts say the sales are being driv- Volvo unit. Klaus Paur, director of auto-
en by Beijing’s subsidy plan that halved motive research at TNS China, thinks a
taxes on cars with engine displacements deal will happen once Geely has found
of 1.6 liters or less – these small cars the right fit for it in its portfolio.
made up 70% of September sales. The Analysts are skeptical of another deal
program is scheduled to end on De- that was agreed to in October: Sichuan
cember 31 and there has been no official Tengzhong Heavy Industrial Machin-
news on whether it will be extended. ery’s US$150 million purchase of GM’s
“As long as the government doesn’t Hummer brand. “It’s not a surprise that
make a clear indication, I think lots of they would see this as an opportunity,
consumers are going to rush to buy small but Tengzhong as an organization is not
cars by the end of year,” said John Zeng, experienced,” said Bill Russo, manag-
senior market analyst for Asia automo- ing director of Synergistics Limited,
tive research at IHS Global Insight. a consultancy. “It’s going to be a very
Even cars with displacements larger difficult task for them to step in and turn
than 1.6 liters are seeing strong sales Hummer around.”
thanks to a rise in consumer confidence.
However, success this year will have a World leader
downside – Zeng expects 2010 sales to China’s monthly auto sales
be weak, with a growth rate of just 5%. 1.5 100
Nevertheless, Goldman Sachs has 1.2 75
Million units
sufficient faith in the long-term strength 0.9 50
%
of the market to invest US$250 million 0.6 25
in local manufacturer Geely Automobile. 0.3 0
Geely plans to use the money, which 0
Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 08 Jul 09 Aug 09 Sep 09
Sales (million units) YoY growth (%)
-25
came via a Goldman-affiliated private Source: China Association of Automobiles Manufacturers
China Economic Review • November 2009 11