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China Day Ahead: ‘Grand Bargain’ on Yuan; ICBC Rights Offer

China is accelerating the yuan’s appreciation as part of the “grand bargain” to win U.S. support for Beijing to gain a bigger say at the International Monetary Fund, says Goldman Sachs Asset Management’s Jim O’Neill.

China’s yuan, as known as the renminbi, reached the strongest level against the dollar since 1993 ahead of a Group of 20 leaders meeting this week in Seoul. The gain came after the IMF’s executive board approved a plan that would make China the third-strongest member in the organization, a position described by the fund’s chief Dominique Strauss-Kahn as allowing Beijing to take more “responsibility” in the global economy.

“People forget, but the currency has risen by 3 percent since the summer and has risen nearly 25 percent over five years,” said O’Neill, chairman of Goldman Sachs Asset, in an interview on Bloomberg Television. It’s not a “fluke” that China is given a bigger share at the Washington-based IMF, and “that’s part of the grand bargain,” he said.

ICBC Rights Offer

Industrial & Commercial Bank of China Ltd., the world’s largest lender by market value, plans to raise 45 billion yuan ($6.8 billion) in a rights offer to replenish capital depleted by credit growth.

The bank will sell 11.29 billion shares in Shanghai at 2.99 yuan each and 3.74 billion shares in Hong Kong at the equivalent price in Hong Kong dollars, according to a statement to the Shanghai stock exchange. Investors will be entitled to 0.45 share for every 10 held.

Reserve Ratio

China’s central bank raised lenders’ reserve requirements as cash from October’s larger-than-forecast $27.1 billion trade surplus threatened to add to the risk of asset bubbles and accelerating inflation.

Reserve requirements will increase 0.5 percentage points from Nov. 16, the People’s Bank of China said in a statement on its website about eight hours after the trade data. The announcement followed media reports of increases for selected banks.

Geithner on G-20

U.S. Treasury Secretary Timothy F. Geithner said he believes the Group of 20 nations can overcome tensions over a proposed framework on trade balances, after recent critical comments from officials in nations including Germany and China.

“I think it overstates the level of disagreement about the challenges we have ahead,” Geithner told reporters en route from Singapore to Seoul for the G-20 leaders’ summit. “We expect we’ll see broad support for the type of cooperative framework the ministers of finance first introduced two weeks ago.”

Tencent Earnings

Tencent Holdings Ltd., China’s biggest Internet company by market value, said third-quarter profit rose 52 percent as sales of online games and advertising revenue surged.

Net income climbed to 2.15 billion yuan ($325 million) from 1.42 billion yuan a year earlier, Tencent said in a statement to the Hong Kong stock exchange. This compares with the 2.16 billion yuan average of 11 analysts’ estimates compiled by Bloomberg.

Chinese Insurers in Canada

Chinese insurance companies will be allowed to invest in Canada through their wealth management operations, Finance Minister Jim Flaherty said.

The agreement with China gives Canadian financial markets access to a pool of up to C$106 billion ($106 billion), Flaherty said in a statement from Seoul, South Korea.

Huaneng Alternative Energy IPO

China Huaneng Group Corp., the nation’s largest electricity producer, applied for an initial public offering for its alternative energy unit in Hong Kong, according to two people with knowledge of the matter.

The Huaneng unit has hired Morgan Stanley, Goldman Sachs Group Inc. and Macquarie Group Ltd. to manage the $1 billion sale, said the people, who declined to be identified because the information is confidential.

Gome, Huang Strike Deal

Gome Electrical Appliances Holdings Ltd., China’s second-biggest electronics retailer, and a company controlled by founder Huang Guangyu said they agreed to appoint Huang’s representatives to the board.

Zou Xiaochun, Huang’s corporate lawyer, will join Gome’s board as an executive director and Huang Yanhong, Huang’s sister, will join as a non-executive director, for three-year terms, Gome said in a Hong Kong stock exchange filing yesterday evening. The board will expand to 13 directors from 11, it said. The agreement is subject to a shareholders’ vote.


U.S. stocks advanced, ending two days of declines, as a rally in oil prices boosted energy shares and Ireland’s central bank governor said the country may return to bond markets next year, easing concern that Europe’s debt crisis will worsen.

Chevron Corp. gained 1.9 percent as oil reached a two-year high following an Energy Department report showing an unexpected decrease in crude stockpiles. Bank of America Corp. rose 2.4 percent, leading financial shares higher. Ford Motor Co. rallied 3.5 percent as the automaker held its lead as the top-earning car manufacturer. Boeing Co. slid 3.2 percent, weighing on the Dow Jones Industrial Average, after suspending test flights of the 787 Dreamliner jet.

The Standard & Poor’s 500 Index advanced 0.4 percent to 1,218.71 at 4:17 p.m. in New York, recovering from a 0.8 percent loss. The Dow climbed 10.29 points, or 0.1 percent, to 11,357.04. Benchmark indexes reached two-yeah highs last week after the Federal Reserve expanded its program of asset purchases to stimulate growth, a tactic known as quantitative easing.

After the market closed, U.S. stock futures fell, indicating the Standard & Poor’s 500 Index may erase yesterday’s gain, after Cisco Systems Inc. projected less profit than analysts estimated.


Banking stocks: China’s central bank will increase the reserve ratio requirement for the nation’s banks by 50 basis points from Nov. 16, according to a statement posted to the People’s Bank of China’s website yesterday.

Coal producers: The Bohai-Rim Steam-Coal Price Index, or BSPI, climbed 2.2 percent to 783 yuan a metric ton as of yesterday compared with a week earlier, according to the Qinhuangdao SeaborneCoal Market website. The weekly gauge tracks power-station coal prices at six major Chinese ports.

China Shenhua Energy Co. (601088 CH), the nation’s largest coal producer, dropped 1.8 percent to 28.55 yuan. China Coal Energy Co. (601898 CH), the second-largest, lost 1.6 percent to 12.70 yuan.

Bank of China Ltd. (3988 HK): The lender said its rights offer of A shares was 99.57% subscribed, generating total proceeds of 41.8 billion yuan, the company said in a Hong Kong stock exchange filing. The stock fell 3 percent to HK$4.64.

Beijing Yu Sheng Tang Pharmaceutical Group Ltd. (1141 HK): The drugmaker said it will raise as much as HK$320 million for working capital and debt payment in a private placing of 1 billion new shares at 32 Hong Kong cents each. The stock gained 3 percent to 34 Hong Kong cents.

China Merchants Securities Co. (600999 CH): The brokerage said 1.53 billion shares will become tradable on Nov. 17. The stock dropped 1.8 percent to 24.16 yuan.

China State Construction Engineering Corp. (601668 CH): The nation’s largest housing contractor said contracts gained in value by 61 percent to 450.8 billion yuan in the January to October period. The stock lost 1.9 percent to 3.68 yuan.

Cosco Shipping Co. (600428 CH): The unit of China’s biggest shipping company said its rights offer has received conditional approval from the securities regulator. The stock slipped 0.8 percent to 9.27 yuan.

Henan Hengxing Science & Technology Co. (002132 CH): The manufacturer of tire steel wire cord said it plans to issue up to 35 million shares in a private share sale at no less than 23.50 yuan per share. The stock slid 2.1 percent to 29.37 yuan.

Modern Beauty Salon Holdings Ltd. (919 HK): The spa operator said it has obtained 10-year rights for Jean Klébert cosmetics and beauty products for Asia outside of Japan, the Philippines and India. The stock surged 43 percent to HK$1.30.

TCL Corp. (000100 CH): China’s biggest publicly traded consumer-electronics maker said sales of LCD televisions fell 20 percent in October from a year earlier to 605,024 units. The shares retreated 1.5 percent to 4.03 yuan.


10 am     China inflation, industrial production, producer
          prices, urban fixed-asset investment, metals

Alibaba (1688 HK)
Rusal (486 HK)


8:10am Jim McCaughan, Chief Executive Officer of Principal Global Investors 9:40am Christopher Artinian, Morton’s Restaurant Group CEO & President 10:10am Richard Iley, BNP Paribas, Chief Economist for Asia Asia ex-Japan. 10:40am Brady Sidwell, Rabobank Northeast Asia Head of Food & Agribusiness Research 11:10am Paul Wuh, Samsung Securities, Internet and Telecom Services analyst/MD

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