The dreadful "S" word

As the Olympic flame goes out in Beijing last Sunday, China has turned back its attention to the economy and stock markets again...although I think China did not even take its eyes off the "two" at any point of time. It seems that China is trying to do everything it can to boost up its slowing economy and sagging markets and to provide measures and reasons why investors should stop selling their stocks further. China's economy and stock markets have been hit by issues like natural catastrophes, high inflation, slowing of growth, an appreciating yuan, hot money and also as noted below the overhang of state owned stocks awaiting release in the open market. Below is the latest possible move targeting the stock markets by the Chinese authorities apart from earlier measures egs. providing guidelines on selling by major shareholders via off market deals, increased disclosure on esos, lower stamp duty to encourage stock transactions, delaying IPOs launches etc. All these measures were implemented to prevent investors from SELLING but sadly were without much success.

Bloomberg: China may let investors sell bonds that can be swapped for shares to deter equity sales and support the nation's stock market, the world's worst performer this year. The China Securities Regulatory Commission is studying exchangeable bonds as part of a package of measures to restrict sales of shares in state-owned companies, said a Beijing-based official of the regulator who declined to be identified before a proposal is made public. The plan would enable state shareholders to raise funds without selling stock on the market, limiting supply as trading restrictions end on more than $1 trillion of government holdings. A cut in trading taxes and curbs on initial share sales failed to halt a 55 percent slump in the benchmark index this year. ``This measure will help ease the pressure placed on the market by state-owned shares,'' said Victor Wang, a Hong Kong- based analyst at UBS AG. ``Investors' sentiment is quite low and the government has been trying to bolster market confidence by limiting massive share sales.'' As much as 8.7 trillion yuan ($1.3 trillion) of government holdings become tradable through 2010, according to local data provider Wind, an overhang that's weighing on investors just as inflation and a slowing economy threaten to undermine earnings growth.

China's benchmark CSI 300 Index soared 7.9 percent on Aug. 20, its biggest gain since April, on speculation the government would announce plans to support a market that has lost $2 trillion in value this year. The index gained 162 percent last year, the world's best performer. It declined 2 percent to 2,349.25 as of 11:30 a.m. Lockup restrictions are set to expire on shares accounting for more than half the combined $2.29 trillion capitalization of the Shanghai and Shenzhen markets. The overhang is the legacy of a 2005 government-led shakeup that converted non-tradable shares into common stock that can be bought and sold on exchanges.

Under the commission's plan, shareholders wanting to sell after lockups expire would have to transfer their stakes to a third party such as a clearing house, according to the official. They would then be allowed to sell bonds to investors that could be swapped for the shares later. The commission doesn't have a timetable for the plan, the official said. The rules haven't been completed and it's unclear if the bonds can be traded before they are turned into common stock, the person said. The measures being considered will include more transparent information disclosure when holders of state-owned companies' shares place sales through block trades, and working with the state-asset supervision agency to monitor transfer of those shares, according to the official.

* Arif got wacked by Anwar in Permatang Pauh's By-Election today. As at now, losing by more than 15,000 votes. Welcome back, Anwar!

* Ringgit got wacked today as our interest rate was kept unchanged. The rate now is 1 USD: RM3.391 ....Dec 08' Crude Palm Oil got wack to RM2,400 per tonne today losing almost RM200.00

* AP: China Life says profit down by 32% for the 1st half compared with same period last year due mainly to downturn of the capital markets. Net profit for the period was USD2.3b or US 8 cents per share.

* Bloomberg: German business confidence index probably fell to a 3 year low in August as recession loomed based on a survey of economists. There was a 0.5% contraction in the 3 months through June due to a drop in construction, company investment and consumer spending. The total growth forecast for the country for the year is 1.7%(2007: 2.5%).

* Bloomberg: Bank of England may cut interest rates by year end as the economy slows?

* Vietnam's inflation rate is expected to hit 28% in August due to increase in prices of food, transportation, housing and construction. (a 17 year high) The government expects inflation to be around 25% for the year. At the moment, Vietnam's prime interest rate is at 14%.