China Capital Markets Research

The latest figures showed that in the first 6 months of 2013, the amount of FDI in China increased to US$61.98bn, a 4.9% increase compared to the first 6 months in 2012. Although the future of Chinese economy is under the threat of slower GDP growth, the figure illustrates that foreign investors are still interested in China as an investment destination. 

FDI into China increased markedly in 1H 2013The latest figure showed that in the first 6 month, 2013, the amount of FDI in China increased to $61.98bn, a 4.9% increase compared to the first 6 months in 2012. . Although the future of Chinese economy is under the treat of slower down GDP growth rate, the figure illustrated that the foreign investors’ passion of investing in China remained at a high level in the first half of 2013.

According to SWIFT (the Society for Worldwide Interbank Financial Telecommunication), the Chinese Yuan (or RMB)'s share of global payments hit a new record high of 0.84% in May 2013, after the total value of yuan payment around the world increased sharply by 24% last month, compared with the average growth rate of 1.9% across other currencies. SWIFT also pointed out that China yuan is still the 13th most-used currency in the international trade. The growing demand for RMB settlement will continue to increase the use of yuan in future.

Increase in RMB usage for trade settlement 

 

 

 

 

Based on CSRC’s data, about 268 firms queuing for IPO in A-share markets chose to quit the IPO process up until 31 May, 2013. 109 of these firms are supported by local VCs and PEs, which take about 41% of the total number of the firms who applied for IPOs in A-share markets. About RMB 8.45 bn investments from local VCs and PEs are locked into these pre-IPO firms, which is challenging for the VC and PE firms who might have been expecting an exit.

The tough supervision of the CSRC is one of the main reasons pre-IPO firms have left the process and only very few meet the standards and of those who did, the worry is that many have cooperated with local stock investment institutions to fake their financial performances to get them listed.

IPO Terminations in Shanghai A-share market

A few weeks ago, we looked at the growth of wealth management in China – a big aspect of wealth management is the Trust industry, which we look at today.

Across multiple metrics, the Chinese futures market grew rapidly from 2006 to 2012. Total assets have grown by 6.5 times over the 6 years, net assets 7 fold and net profit growth by nearly 22 times in 2012 compared to 2006. So it is quite clear that Chinese futures industry is growing at a high speed during the past few years and it is highly likely to expand even faster due to the opening up of the markets.

Growth of China Futures Industry 2006-2012 

 

 

Based on the recent half-year performance of hedge funds, it appears that the average performance of all types of hedge funds outperformed the market return significantly with macro-economic hedge funds ranked first in returns from November of 2012 to the end of April of 2013.

Chinese Hedge Fund performance exceeded market returns 

 

 

The latest Chinese manufacturing PMI is 50.6, declining by 0.3 point from March. From May 2012 to April 2013, this PMI figure has hovered the important line of 50 which is the watershed between economic growth and shrinkage. It signals that the growth of Chinese manufacturing economy is still fluctuating, largely because of the transformation and reformation of Chinese manufacturing industries during this period. The trend is expected to continue in the future so we will likely see continued fluctuations.

China's PMI over the recent past

There are two main sub-industry categories that QFIIs seem to be investing in in China's A-Share market: the mechanics and food & drink manufacturing industries. During the first quarter of 2013, there was a slight decline of 1.55% in the QFII shareholdings in the mechanics manufacturing industry and a 5.78% increase in the food & drink industry.

 

Wealth management refers to a type of financial analysis, financial planning and management service that banks provide to high net worth individuals. Banks have the obligation to return certain profit by managing customers' funds in an agreed period of time.

The trust industry is currently the fastest growing segment in China's asset management industry so far in 2013. In Q4 2012, the total trust AUM was about US$1.195 trillion. At the end of Q1 2013, this number had reached about US$1.395 trillion representing a growth rate of about 16.7%. That growth rate is actually faster than the growth rate of bank loans / deposits, market growth of the securities market, bonds, funds and insurance industry.

 

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