China Capital Markets Warming Up to New IPOs?

Zhongwang, China's largest aluminum extrusion product maker, plans to raise as much as $1.6 billion on the Hong Kong Stock Exchange in an IPO that will potentially be the largest in the world so far this year. Strong stock performances in the Hong Kong and China markets since late last year have raised the hope that investor appetite might have returned to support such a large IPO. From its low in November, the Hong Kong Hang Seng Index has rebounded by 24%, while the Chinese A-share market went up by nearly 45% during the same period.

As market sentiment improves, there are clear signs that Chinese investors may once again show interest in new stock offerings. After an extended absence of new IPOs on the Chinese stock market, some news reports have emerged to indicate that Chinese regulators may consider allowing new companies to raise capital through IPOs again in the second half of 2009. Meanwhile, the regulators are busy drawing up policies for a new stock exchange based in Shenzhen, specifically for small-growth companies that can't qualify to trade on the main board. In other words, China's equivalent of Nasdaq is taking shape and may be in business before the end of 2009.

Market Recap
Investors' concern over the economic recovery, coupled with profit-taking after the A-share benchmark index hit 2,500, sent the stock indexes to their first weekly decline in six weeks. Over the past week, the Shanghai Composite Index fell 2.2% to close at 2,448 points, while the Shenzhen Component Index dropped 2.8% to 9,315 points.

Financial
China to Allow Hong Kong Firms to Issue CNY Bonds
The new policy will allow Hong Kong firms to use their assets in Hong Kong as collaterals in order to obtain CNY-denominated loans to fund their operations in the mainland.

Chinese Gold Reserve Stands at 1,054 Metric Tons
The figure represented a 76% increase from the 600 metric ton number it released in 2003, the last time China gave out information about its gold reserve. China increased its holdings of gold from 394 metric tons to 500 metric tons in 2001 and then to 600 metric tons in 2003. The statistics came from China's State Administration of Foreign Exchange (SAFE).

Technology
Telecom Equipment Maker Huawei Generates 75% of Sales from International Markets
According to Huawei's annual report, its 2008 revenue grew by 42.7% to $18.3 billion, thanks to its low-price strategy and full-range total solutions. Revenue grew by 48% in 2007. International sales, mainly from Europe, Middle East, and Africa, account for about three fourths of its total business. For this year, Huawei will see robust growth again as the firm benefits from China's 3G infrastructure build-out and from global telecom carriers' efforts to source low-cost vendors under the current economic environment.

Chinese Telephone Users Topped 1 Billion
According to the Ministry of Industry and Information Industry, the number of mobile subscribers continued to climb while fixed-line operators kept losing users. In the first three months of 2009, about 29.1 million new mobile users were added and total wireless subscriber base reached 670 million. Meanwhile, about 5.5 million fixed-line subscribers dropped out. In the first quarter, total telecom services netted revenue of CNY 196.73 billion ($28.8 billion), up by 1.7% year over year. Wireless revenue accounted for nearly 60% of the total revenue.

Consumer
Pearson (PSO) Bought Wall Street English for $145 Million in Cash from Private Equity Firm Carlyle Group
Wall Street English is a leading English language training company targeting white-collar office workers in China. The adult English training market in China is dominating by New Oriental, EF, and Wall Street English. None of them has more than 20% of the market.

China's Largest Electronics Appliance Chain Gome to Close 100 Stores in 2009
Hong Kong-listed Gome had 1,350 stores in China at the end of 2008 and controlled about 40% of market share in China. Its smaller rival Suning Appliances had about 850 stores, but it is generally believed to be more profitable. Gome was hard hit by the recent arrest of company founder and former chairman Huang Guangyu following allegations of bribery and money laundering and by slowing consumer spending amid the economic slowdown. The firm was reportedly in talks with private equity firms earlier this year to sell stakes in exchange for funding.

Lun Lu and Iris Tan contributed to this article.