Friday, 7 September 2007

Stockmarket Round-up

As Chinese shares reach NEW HIGHS here are a couple of FT articles of note:

China bubbles as world goes crunch
As the European Central Bank pumps billions of euros into the money markets, and financiers worldwide fret about a messy end to a period of loose credit conditions, it is apposite that the Chinese stock market hit a new high on Thursday. It shows how oblivious to caution or bad news a market in the grip of a liquidity-driven boom can be.

China’s market has doubled since the start of the year, but earnings growth – running at levels of as much as 75 per cent – has almost kept pace. The result is that while valuations, of about 35-40 times prospective earnings, look high, they still do not look insane.

They look pretty insane to me. Why? Because there is just no quality underlying this growth. We are not dealing with established Western companies here. Cut throat competition and many other factors should keep valuations low. This is still a serious bubble although my predictions (see previous stockmarket posts) are looking a little shaky now.

China’s plan on buying foreign shares delayed
China’s plan to allow individual investors to buy overseas securities for the first time has not materialised yet because detailed rules are still being drafted, the country’s main stock regulator said on Thursday.

Finally, a little piece on "Barbie-gate". There is an element of truth to this article. The motivation for overseas companies migrating to China is not to be charitable. They are profit maximising and for some that means environmental short cuts, bribery and paying very low wages.

Foreign-funded companies in China should ensure product quality: NDRC official[People's Daily]
Companies with foreign investment in China should shoulder the responsibility of ensuring and improving product quality, an official with the National Development and Reform Commission (NDRC) said Friday at the Summer Davos meeting in Dalian.

Sixty percent of China's exported products are made in foreign- funded companies, said Zhang Xiaoqiang, vice minister of the NDRC. These companies should have an eye to their product quality in terms of designing, setting up standards and making requirements for raw materials.

"Good product quality is crucial to a company's long-term development," he said.

China has been obsessed with a string of product quality complaints, with its exported toys recalled and food accused of containing toxins.

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