China Day Ahead: Rare Earth Embargo Ends; Sinopec Earnings Rise

China ended its undeclared embargo of exports of crucial strategic minerals to the U.S., Europe and Japan, although shipments to Japan still encountered difficulties, the New York Times reported, citing four unidentified rare earth industry officials.

Chinese customs officials, without explanation, allowed shipments to resume to all three destinations, the newspaper reported, citing the officials, who asked for anonymity because of the diplomatic sensitivity of the issue. Shipments to the U.S. and Europe had been blocked since Oct. 18 and to Japan since Sept. 21, the Times said.

Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co. plans to invest 2 billion yuan to 3 billion yuan over five years to accumulate reserves of rare-earth metals in 10 locations after a successful stockpiling trial this year, the Nikkei English News said, citing people close to the Ministry of Land and Resources.

Sinopec Earnings

China Petroleum & Chemical Corp., called Sinopec, said net income gained 15 percent to 19.6 billion yuan ($2.9 billion) in the third quarter. That surpassed the 18.16 billion yuan average estimate of seven analysts surveyed by Bloomberg News. Sinopec didn’t report revenue.

Obama-Hu Meeting

President Barack Obama and President Hu Jintao of China are scheduled to meet one-on-one Nov. 11 at the Group of 20 summit amid strains over currency and trade.

The agenda for Obama’s discussion with Hu, their seventh meeting since Obama became president, is likely to include the balance of trade between the two countries as well as U.S. and global concern about the valuation of China’s currency, Jeff Bader, senior director for Asian Affairs at the National Security Council, said at a White House briefing.

H.K. Exhausts Yuan Quota

The Hong Kong Monetary Authority activated its swap agreement with the People’s Bank of China after the city completely exhausted this year’s quota for yuan-conversion for trade settlement.

The Authority plans to draw 10 billion yuan through the arrangement, out of the annual maximum of 200 billion yuan, to meet demand, Deputy Chief Executive Arthur Yuen told reporters in Hong Kong yesterday. Banks should use long yuan positions or buy the currency from other banks as needed, he said.

Sanofi-Aventis Buys China Drugmaker

Sanofi-Aventis SA agreed to buy BMP Sunstone Corp., the maker of the Hao Wa Wa brand of children’s cough and cold treatments, for $520.6 million in cash to expand in Chinese consumer health-care products.

BMP Sunstone stockholders will receive $10 a share, about 30 percent more than the Oct. 27 closing price on the Nasdaq Stock Market, Paris-based Sanofi said in a statement. BMP Sunstone’s board approved the sale, and shareholders who own 23 percent of the Beijing-based company’s stock agreed to support the deal, Sanofi said.

IMF Says Yuan Undervalued

Decisions by China and some other Asian emerging economies to limit currency appreciation is contributing to “significant exchange-rate misalignments” and to tensions across the Group of 20, the International Monetary Fund said in a note to finance officials.

The IMF, which called the yuan “substantially undervalued” and the dollar “on the strong side of fundamentals,” urged developing nations with current-account surpluses to let exchange rate appreciation begin “in earnest.” At the same time, it said advanced economies must repair their financial systems and plan to curb budget deficits in 2011 to help shift the sources of global demand.

Air China, China Eastern

Air China Ltd. and China Eastern Airlines Corp., the world’s largest and third-biggest carriers by market value, reported quarterly profit surges because of a rebound in air-travel demand and a stronger yuan.

Net income at Air China jumped more than fivefold to 5.2 billion yuan ($778 million) in the third quarter, the company said in a stock exchange statement. China Eastern, which also received a boost from the Shanghai Expo, said profit surged more than 130-fold to 3.15 billion yuan.

China Life Earnings

China Life Insurance Co., the nation’s biggest insurer, said third-quarter profit rose 3.4 percent as a rally in the nation’s stock market lifted investment returns and premiums expanded.

Net income climbed to 6.91 billion yuan ($1.03 billion) from a restated 6.68 billion yuan, a year earlier, the Beijing- based company said in a statement to the Shanghai stock exchange. Earnings per share were unchanged at 0.24 yuan.

Dongfeng Motor Earnings

Dongfeng Motor Group Co., the Chinese partner of Nissan Motor Co., almost doubled nine-month profit as economic growth spurred demand for cars.

Net income rose to 8.61 billion yuan ($1.3 billion) from 4.63 billion yuan a year earlier, the company said in a Hong Kong stock exchange statement. Third-quarter profit was little changed at 2.08 billion yuan, according to figures derived from the nine-month results.

Pacific Basin Outlook

Pacific Basin Shipping Ltd., Hong Kong’s largest operator of dry-bulk vessels, forecast an upswing in demand from next month through early 2011 as Chinese steelmakers rebuild stocks of iron ore.

The resumption of Indian trade following monsoons and increased demand for U.S. grain shipments because of a Russian export ban will also drive volumes, the shipping line said in a Hong Kong stock exchange statement.

EU Tariffs

The European Union threatened to extend to Malaysia tariffs on screws and bolts from China, saying Chinese exporters may have used the nation to evade the levies and undercut EU producers.

The European Commission opened a probe into whether Chinese exporters of iron or steel fasteners shipped them to the 27-nation EU via Malaysia. The EU duties on imports of fasteners that originate in China are as high as 85 percent in a case that prompted a complaint by the Chinese government.


Most U.S. stocks fell as 3M Co. drove industrial shares lower after cutting its profit forecast, helping erase an early gain triggered by Exxon Mobil Corp.’s better-than-estimated earnings report.

3M sank 5.9 percent, the most since February 2009, after saying full-year earnings will be 6 cents lower than previously forecast. Halliburton Co. dropped 8 percent as a report cited unstable cement the company recommended to cap BP Plc’s Gulf of Mexico oil well as a factor in the spill. Exxon rose 0.8 percent as growing global fuel demand helped boost earnings.

About five stocks declined for every four that advanced on U.S. exchanges. The Standard & Poor’s 500 Index gained 0.1 percent to 1,183.78 at 4 p.m. in New York after climbing as much as 0.6 percent. The Dow Jones Industrial Average decreased 12.33 points, or 0.1 percent, to 11,113.95. The Dollar Index, a gauge of the currency versus six major peers, lost 1.1 percent.


Aluminum Corp. of China Ltd. (601600 CH): The listed unit of nation’s biggest maker of the lightweight metal, also called Chalco, said it hasn’t re-applied for a sale of yuan-denominated shares, denying a report by Shanghai Securities News. The stock gained 5.4 percent to 13.14 yuan.

Beijing Tongrentang Co. (600085 CH): The Chinese medicine maker’s third-quarter net income rose 15 percent from a year ago to 72.4 million yuan, according to a statement to the Shanghai Stock Exchange. The stock rose 5.2 percent to 36.95 yuan.

Beiqi Foton Motor Co. (600166 CH): The automaker said third-quarter net income rose 80 percent from a year earlier to 442 million yuan. The stock gained 1 percent to 27.07 yuan.

Bank of Communications Ltd. (601328 CH): China’s fifth-largest bank said it posted a 24 percent gain in third-quarter profit as an economic recovery boosted income from loans and lending margin. The stock gained 0.5 percent to 6.38 yuan.

Bank of Ningbo Co. (002142): The Chinese bank’s third-quarter net income rose 54.9 percent from a year earlier to 615 million yuan, according to a statement to the Shenzhen Stock Exchange. The stock gained 1.4 percent to 14.05 yuan.

China Construction Bank (601939 CH): The lender may collect less than the maximum 75 billion yuan ($11.2 billion) it initially planned to raise in Asia’s biggest rights offer, four people with knowledge of the matter said. The stock jumped 0.4 percent to 5.15 yuan.

China Kangda Food Co. (834 HK): The meat producer said nine-month net income will be lower than in the same period last year because of rising labor and raw material costs in China, where there is an oversupply of chicken. The stock fell 3.6 percent to 81 Hong Kong cents.

China Merchants Bank Co. (600036 CH): The Chinese lender said the China Banking Regulatory Commission has approved the appointment of Fu Yuning as the company’s chairman, effective yesterday. The stock added 1.2 percent to 14.93 yuan.

CSR Corp. (601766 CH): The railway rolling-stock maker said third-quarter net income rose 70 percent to 702.7 million yuan. The company said it will invest 910 million yuan to take a 91 percent stake in a finance venture with its parent. The stock fell 0.2 percent to 6.04 yuan.

China CSSC Holdings (600150 CH): The unit of China’s biggest shipbuilder said its third-quarter net income rose 1.3 percent to 774.9 million yuan. The stock dropped 1.6 percent to 64.95 yuan.

China Cosco Holdings Co. (601919 CH): Asia’s largest shipping company by market value said it returned to profit in the third quarter as a rebound in global trade boosted container-freight rates. The stock rose 0.5 percent to 11.21 yuan.

China Life Insurance Co. (601628 CH): The nation’s biggest insurer said third-quarter profit rose 3.4 percent as a rally in the nation’s stock market lifted investment returns and premiums expanded. The stock fell 1.2 percent to 25.82 yuan.

China Railway Construction Corp. (601186 CH): The builder of more than half the nation’s railroads said it had a third-quarter net loss of 1.36 billion yuan, compared with a profit of 1.45 billion yuan a year earlier. The stock dropped 0.3 percent to 7.49 yuan.

China Construction Bank Corp. (601939 CH): The country’s second-largest bank may raise less than the maximum 75 billion yuan ($11.2 billion) it originally planned to collect in Asia’s biggest rights offer, four people with knowledge of the matter said. The stock added 0.4 percent to 5.15 yuan.

Daqin Railway Co. (601006 CH): The company said its third-quarter net income increased by 54 percent to 3.04 billion yuan. The stock fell 0.2 percent to 8.98 yuan.

Dragonlott Entertainment Group Ltd. (8078 HK): The company which is changing its name to China 3D Digital Entertainment Ltd., canceled its planned placing of as many as 280.5 million new shares. The stock was unchanged at 38 Hong Kong cents.

FAW Car Co. (000800 CH): The automaker said third-quarter net income fell 16 percent to 305 million yuan. The stock dropped 1.5 percent to 20.53 yuan.

Guoyuan Securities Co. (000728 CH): The brokerage said third-quarter net income fell 22 percent from a year ago to 252 million yuan. The stock fell 4.3 percent to 14.89 yuan.

GZI Transport Ltd. (1052 HK): The toll-road operator said it will receive 1.31 billion yuan in compensation from the Guangzhou city government in exchange for the loss of operating rights for Class I highways. The stock was unchanged at HK$4.07.

Industrial & Commercial Bank of China Ltd. (601398 CH): The world’s largest lender by market value said third-quarter profit increased 27 percent and that it has agreed to buy control of AXA SA’s local-insurance unit to add non-banking revenue. The stock rose 0.2 percent to 4.46 yuan.

Orange Sky Golden Harvest Entertainment (Holdings) Ltd. (1132 HK): The movie producer, distributer and exhibiter said it doesn’t currently have an agreement to invest $100 million in Village Roadshow Pictures. The company published the statement in response to a Wall Street Journal article. The stock was unchanged at 52 Hong Kong cents.

Shanghai Electric Power Co. (600021 CH): The power generator reported a net loss of 16.2 million yuan in the third quarter. The stock was unchanged at 4.27 yuan.

Shanghai International Airport Co. (600009 CH): The airport operator said third-quarter net income rose 83 percent from a year earlier to 398.8 million yuan. The stock fell 0.9 percent to 13.87 yuan.

Shanghai International Port (Group) Co. (600018 CH): The port operator said it will issue 1.76 billion shares at 4.49 yuan each to Tongsheng Investment Group. The stock was suspended.

Shanghai Pudong Development Bank Co. (600000 CH): The Chinese lender said net income in the third quarter rose 64 percent from a year ago to 5.8 billion yuan. The stock rose 1 percent to 14.57 yuan. The stock rose 1 percent to 14.57 yuan.

Wuhan Iron & Steel Co. (600005 CH): The steelmaker said third-quarter net income fell by half from a year ago to 276.3 million yuan. The stock fell 1.5 percent to 5.11 yuan.


Shale gas summit in Shanghai ends today.
China metal stockpiles, after 3 pm

Hong Kong trading debut:
AIA Group Ltd. (1299 HK)

China Unicom (762 HK)
China Shenhua (1088 HK)
Citic Bank (998 HK)
Minsheng Bank (1988 HK)
China Construction Bank (939 HK)
Angang Steel (347 HK)


12:10pm   Andrew Sullivan, OSK Securities Hong Kong,
          Director of Institutional Sales Trading
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