Early Signs of Recovery in China?

For investors who were battered and bruised last year by the 65% drop in the Chinese stock market, the latest manfuacturing data seem to offer a glimmer of hope. China's Purchasing Managers Index (PMI), a good gauge of industrial activities, came in at 45.3 for January, up from 41.2 in December. Although the statistics confirmed that China's manufacturing industry has been in decline for the sixth consecutive month (any reading under 50 means contraction), we are glad to see the improvement from December. Granted, it's too early to read too much into it, but we cannot help but wonder if we are seeing some signs of recovery. As a component of the PMI data, the subindex for new export orders rose in January, although the overall demand picture remains uninspiring. China had reported export declines in both November and December.

We are now eagerly awaiting the consumer and producer price indexes for January, which should be released soon, to provide more clues into the economy, although we'd caution that the Chinese New Year holidays that started in late January may have skewed the numbers somewhat. According to the Chinese zodiac, 2009 is the Year of Ox , which symbolizes harvest and productivity. Many Chinese people may be secretly hoping that the magical Ox can come to the rescue, but in reality, we think swift and sure-handed actions delivered by the Chinese government and its banks would do much more to help the economy from sliding further this year.

Market Recap
In the first trading week since China ushered in the Year of Ox, stocks went up as confidence of an economic recovery improved. The Shanghai Composite Index and Shenzhen Composite Index each rose by 10% for the week, closing at 2,181 and 7,712, respectively.

Technology
Lenovo Reshuffles Management amid Sales Decline
This week, Lenovo chairman Yang Yuanqing took over the CEO position from his predecessor William Amelio, while company founder Liu Chuanzhi came back from retirement to take up the chairman position. The changes at the top took place at a time when the world's fourth-largest PC maker is facing grim market conditions both at home and abroad. The company said revenue dropped by 20% sequentially in the December quarter and its global market share slid slightly to 7.3%. It lost about $100 million in the quarter.

Telecom Operator PCCW's Privatization Plan May Be Delayed
PCCW, Hong Kong's largest fixed-line operator, this week received overwhelming support for its privatization plan at a special shareholder meeting. The operator is scheduled to delist from the Hong Kong Stock Exchange later in February, but some media reports said that regulators' investigation into allegations of possible vote rigging at the shareholder meeting may delay the process.

Retail
McDonald's Slashes Prices in China
The company announced in Beijing this week that it will offer discounts on 40% of its products in China for the next 12 months. Some of the products will cost 30% less, or at the price levels 10 years ago. At the same time, however, McDonald's said it will continue expanding in 2009, adding another 175 restaurants in China. McDonald's major rival in China,  Yum Brands (YUM), ran similar price promotions that lasted for a shorter period.

Anheuser-Busch Inbev Sold 19.9% Stake in Tsingtao Beer to Japanese Brewer Asahi
The deal, valued at $680 million, will make Asahi the second-largest shareholder of Tsingtao. Anheuser-Busch Inbev will retain about a 7% of stake in Tsingtao; reportedly Anheuser-Busch Inbev said it has no plans to dispose of its remaining stake.