Ali Baba IPO

Chinese e-commerce portal Alibaba.com could raise up to $1.5 billion (€1 billion) in its Hong Kong listing next month, the company said Monday, describing it as the biggest Internet IPO since Google.

Alibaba Group, the company that controls the business-to-business commerce Web site, said it plans to sell 858.9 million shares at an indicative price range of 12 to 13.50 Hong Kong dollars each, up from an earlier initial price of HK$10-HK$12.

Alibaba's charismatic founder Jack Ma, a former English teacher who set up the company in 1999, told reporters the profits would help build a "world-class infrastructure and ecosystem for e-commerce, which will contribute to the sustained growth of the Chinese economy."

Ma was speaking by video phone from the United States where he is drumming up support for the IPO.

Alibaba -- which allows companies in both China and overseas to trade with one another online -- is one of China's fastest growing Internet companies.

It has seen its registered members soar from 6 million in 2004 to 24.6 million in 2007. Paying members increased from 77,000 in 2004 to 255,000 by June 2007.

The company recorded a net profit of 295.2 million Chinese yuan ($39.2 million; € 27.5 million) in the six months ended June 2007.

It expects its net profit to more than triple to 622 million yuan ($83 million; €58 million) from 219.9 million yuan, on strong growth in revenue from both its international and Chinese Web sites.

Unlike other offerings in which most of the shares on offer are newly issued shares, nearly three-quarters of the shares in the IPO are existing shares held by Alibaba.com's parent, Alibaba Group.

About 85 percent of the shares are marked for institutional investors with the rest open to retail investors.

Already, the shares are in high demand, with the South China Morning Post newspaper reporting the institutional tranche was already 50 percent subscribed before the price was raised Yahoo! Inc., which holds a 39 percent stake in Alibaba.com's parent, Alibaba Group, had already agreed to subscribe to about $100 million worth of shares.

Alibaba said another seven "strategic" investors had agreed to take a stake, representing in total about HK$2.3 billion ($296 million; € 207 million)or 20 percent of the offering.

They include Cisco Systems International B.V., AIG Global Investment Corporation (Asia) Ltd., FoxConn (Far East) Ltd. and Industrial and Commercial Bank of China Ltd., as well as investment companies held by Wharf Holdings Ltd. Chairman Peter Woo, Malaysian tycoon Robert Kuok and the Kwok family of Sun Hung Kai Properties Ltd., the company said.

Strong demand from the public -- which can start buying the shares from Tuesday -- is also expected to trigger an extra allocation of 113.67 million shares to raise a total of $1.7 billion (€ 1.19 billion).

Net proceeds from the listing were expected to be about HK$2 billion ($335 million; € 234.46 million), the company said, which would be spent on strategic acquisitions and development initiatives to grow the company's business both in China and overseas.

Shares of the company, which claims to be the largest business-to-business e-trading site in China, will begin trading on Nov. 6

Chinese Manufacturing Continues To Accelerate

China's manufacturing activity expanded at a faster pace in September, according to a survey by CLSA Asia Pacific Markets.The Purchasing Managers' Index rose to a three-month high of 55 from 53.4 in August, CLSA said today in an e-mailed statement. A reading above 50 indicates an expansion.

Rapid manufacturing growth is becoming even more rapid it seems. Monetary policy is still extremely loose and China's economy is still accelerating.

The CLSA index is based on replies to questionnaires sent to purchasing executives at more than 400 industrial companies. The survey tracks changes in output, new orders, employment, prices, inventories and delivery times. The data is seasonally adjusted.

The output index rose to 58.3 in September from 54.6 in August, while the index of new orders climbed to 59.3 from 54.6. The index of export orders increased to 52.9 from 52.3.

A government PMI survey, released by the China Federation of Logistics and Purchasing and the National Bureau of Statistics yesterday, also showed a higher reading. The index climbed to 56.1 in September from 54 in August.

Factory Investment Continues To Rise

China's spending on factories, equipment and property climbed 26.7 percent in the first eight months of 2007 according to the statistics bureau today.

The world's fourth-largest economy expanded 11.9 percent in the second quarter from a year earlier, the fastest pace since 1994. The trade surplus grew 33 percent in August to $24.97 billion. Inflation jumped to 6.5 percent.

From January to August, urban investment in fixed assets hit 6,665.9 billion yuan, a rise of 26.7 percent year-on-year. Of the total, state -owned and state controlled enterprises invested 2,877.7 billion yuan, surging 16.7 percent; real estate development enterprises valued at 1,427.7 billion yuan, rose by 29.0 percent.

In terms of jurisdiction of management, central investment stood at 643.5 billion yuan with growth rate of 13.2 percent as compared with previous year; that of local investment totaled 6,022.4 billion yuan, jumping 28.4 percent.

In terms of different industries, investments of primary, secondary, and tertiary industry amounted to 78.3, 2,962.6 and 3,625 billion yuan, expanding 42.9, 29.5 and 24.3 percent respectively, year-on-year.

In terms of different sectors, investments of mining and washing of coal stood at 90.8 billion yuan, a year-on-year rise of 22 percent; that of extraction of petroleum and natural gas grew to 108.1 billion yuan, increasing 10.5 percent; that of manufacture of non-metallic mineral products, smelting and pressing of ferrous metals, smelting and pressing of non-ferrous metals respectively valued at 162.1, 149.9 and 74.1 billion yuan, jumping 49.6, 12.9 and 29.2 percent; that of production and supply of electricity and heat, railway transport arrived at 460.7 and 119.3 billion yuan, climbing 11.5 and 3.4 percent year-on-year.

In terms of registration status, investments of domestic funds enterprises stood at 5,909.3 billion yuan, surging 27 percent over that in the same period last year; that of enterprises with funds from Hong Kong, Macao and Taiwan valued at 322.4 billion yuan, rising 32.5 percent; and that of foreign funded enterprises standing at 397.6 billion yuan, up 17.1 percent, year-on-year.

In terms of buildings under and new constructions, by the end of August, the cumulative number of urban construction projects over 500,000 yuan was 237,000, a year-on-year increase of 29,286; that of total investment planned in project under construction stood at 211,981 trillion yuan, climbing 17.9 percent; that of number of project started this year valued at 149,751, a year-on-year rise of 18,665; that of total planned investment of newly projects was 5,194.2 billion yuan, a rise of 16.7 percent.

In terms of volume of positioned funds, investment in urban areas hit 7,677.8 billion yuan, a year-on-year rise of 27.1 percent. Of which, domestic loans, foreign investment, and self-rising funds rising 12.7, 16.3 and 32.2 percent respectively, year-on-year.

People's Bank of China Raises Interest Rates

The People’s Bank of China raised interest rates for the fifth time since March today in an effort to curb the fastest inflation since 1996 and damp speculation in stocks and real estate.

The benchmark one-year lending rate will increase to a nine-year high of 7.29 percent from 7.02 percent, starting tomorrow, the central bank said today on its Web site. The rate has risen from 6.12 percent on March. here is the rather terse text of the communique:


"

In order to strengthen liquidity management in the banking system and check the excessive growth of monetary credit, the People’s Bank of China has decided to raise the RMB reserve requirement ratio for depository financial institutions by 0.5 percentage points as of September 25, 2007.

"

Money supply grew 18.1 percent in August, exceeding the central bank's annual target of 16 percent for the seventh straight month. Urban fixed-asset investment climbed 26.7 percent in the first eight months of this year.

August Industrial Output Growth Slows

China's industrial production rose 17.5 percent in August, slowing for a second month after the government increased taxes on exports. The increase was down from an 18 percent gain in July.The slowdown may be insufficient to deter the central bank from raising interest rates for a fifth time this year after inflation surged to an almost 11-year high and the trade surplus widened to the second-highest on record.

China's trade surplus widened 33 percent in August from a year earlier to $24.97 billion.

Foreign direct investment in China climbed 12.8 percent through August from a year earlier. Spending rose to $41.9 billion, the Ministry of Commerce said today at a briefing in Beijing. The pace slowed from a 12.9 percent increase in the first seven months. For August alone, investment jumped 11.9 percent to $5.1 billion.

China was the world's fourth-largest recipient of foreign direct investment in 2006 after the U.S., U.K. and France according to the United Nations. Spending by overseas companies climbed 4.5 percent from a year earlier to $63 billion. Including the financial industry, investment fell 4.1 percent to $70 billion.

Disposable incomes among urban households climbed 14.2 percent in the first half from a year earlier.

Inflation Continues To Rise in August

Soaring food prices propelled China’s annual consumer price inflation to 6.5 per cent in August, the fastest pace in nearly 11 years, raising expectations that the central bank will defy the global trend and keep raising interest rates. The inflation rate published today, up from 5.6 per cent in July, was the highest reading since December 1996.

Also, according to the National Bureau of Statistics proucer prices keep rising too:

In August, Producers’ Price Index (PPI) for manufactured goods up by 2.6 percent from the same month last year; purchasing prices for raw material, fuels and power rose by 3.8 percent.

PPI for means of production increased 2.2 percent over last August. Of the total, PPIs for mining and quarrying industry increased 1.4 percent; that for raw materials industry and manufacturing industry correspondingly up by 3.9 and 1.5 percent; that for means of consumer goods grew 3.5 percent. Of which, price for foodstuff increased 8.6 percent; that of clothing and commodities rose 1.2 and 1.8 percent respectively, while that for durable consumer goods dropped 0.5 percent.

Fixed asset investment continues to be very high:

From January to July, urban investment in fixed assets hit 5,669.8 billion yuan, a rise of 26.6 percent year-on-year. Of the total, state -owned and state controlled enterprises invested 2,431.7 billion yuan, surging 16.5 percent; real estate development enterprises valued at 1,213.5 billion yuan, rose by 28.9 percent.

and In July, the total retail sales of consumer goods reached 699.8 billion yuan, a year-on-year increase of 16.4 percent.



While in August, according to a news release today China's retail sales grew at the fastest pace in more than three years, buoyed by higher prices and rising incomes in what must surely be the world's fastest-growing major economy. Sales climbed 17.1 percent in August from a year earlier to 711.7 billion yuan ($95 billion) after gaining 16.4 percent in July.

China Raises Rates for Fourth Time to Cool Inflation

From Bloomberg today:

China Raises Rates for Fourth Time to Cool Inflation (Update1)

By Nipa Piboontanasawat

Aug. 21 (Bloomberg) -- China raised interest rates for the fourth time since March to cool the world's fastest-growing major economy after inflation surged to a 10-year high.

The benchmark one-year lending rate will increase 0.18 percentage point to 7.02 percent tomorrow, the People's Bank of China said on its Web site. The one-year deposit rate will rise 0.27 percentage point to 3.6 percent.

China's economy grew at the fastest pace in more than 12 years in the second quarter on investment and exports. Consumer prices climbed 5.6 percent in July as the cost of food soared, while the central bank later cautioned that inflationary pressures were broadening.

``This is a reflection of the central bank's concern about inflation and asset bubbles,'' said Ma Jun, chief China economist at Deutsche Bank AG in Hong Kong. ``We can't rule out another interest rate hike this year.''

It's the second time this year that deposit rates increased more than lending rates. The government is trying to make bank savings more attractive to stem the flow of money into property and stock speculation and curb asset bubbles.

The increase is to control ``money supply and loans and stabilize inflation expectations,'' the central bank said.

`Bigger' Bubble

Inflation has outstripped returns on bank savings. The government reduced a tax on interest income last week to 5 percent from 20 percent to make deposits more attractive.

``This is targeted at slowing the money flowing into the stock market,'' said Liao Qun, chief economist at Citic Ka Wah Bank in Hong Kong. ``As the bubble gets bigger, the chance of it bursting is also bigger.''

The key CSI 300 Index has climbed 144 percent this year after more than doubling in 2006. Property prices have also surged. In July, housing prices jumped 19.4 percent from a year earlier in Shenzhen and 10.4 percent in Beijing.

Wang Qing, chief China economist at Morgan Stanley in Hong Kong, said the central bank may raise interest rates again in the fourth quarter.

China is easing controls on money leaving the country to reduce the build-up of cash in the financial system. Yesterday, the government said Chinese investors will be allowed to put money into Hong Kong stocks.

Trade Tension

A stronger yuan would also help to curb the inflow of money and reduce tension with trading partners including the U.S. The currency has gained 9 percent versus the dollar since a revaluation in July 2005. U.S. manufacturers say the yuan is kept weak to make China's products cheap.

Besides raising rates, the People's Bank of China has ordered lenders to set aside larger reserves on six occasions this year. It has also sold bills to soak up cash.

The top priority is to prevent the economy from overheating and keep prices tamed, the central bank said in a quarterly monetary-policy report released Aug. 8.

Consumer-price increases aren't solely the result of ``temporary factors,'' the People's Bank of China said then, highlighting energy and labor costs and people's expectations for inflation.

Economists are split on whether the acceleration in consumer prices is temporary and limited to food or ``getting out of control,'' a term used last month by Tao Dong, chief Asia economist at Credit Suisse Group in Hong Kong.

Non-food inflation slowed to 0.9 percent in July from at least 1 percent in each of the previous five months.

China's economy, the world's fourth largest, expanded 11.9 percent in the second quarter from a year earlier.

The trade surplus surged 67 percent in July from a year earlier to $24.4 billion, the second-highest monthly total. Money supply climbed 18.5 percent, the biggest increase in more than a year.

Fixed-asset investment in urban areas increased 26.6 percent in the first seven months from a year earlier, close to the 26.7 expansion in the first half.

Also the Financial Times:

Chinese central bank raises interest rates

By Reuters, August 21, 12.13 BST

China raised interest rates on Tuesday for the fourth time this year to stabilise inflation after consumer prices rose in July at the fastest pace in more than a decade.

The People’s Bank of China (PBOC) said it was raising the rate that banks pay for one-year deposits by 27 basis points, to 3.60 per cent, and the corresponding benchmark for lending rates by 18 basis points, to 7.02 per cent from 6.84 per cent.

The increases go into effect on Wednesday.

Although the timing was a surprise, the action itself was not despite turbulence in global markets that has prompted the Federal Reserve to cut its discount rate and hold out the prospect of a reduction in the federal funds rate.

Most economists had forecast an increase, both to anchor inflationary expectations and to reduce the incentive for savers to take their money out of the bank – where real deposit rates are deeply negative – and pile into the surging stock market.

”The PBOC is concerned about falling real deposit rates spurring the flow of funds out of deposits into equities. We don’t think this is a response to strong growth,” said Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong.

Although the economy expanded 11.9 per cent in the second quarter from a year earlier, Lin Songli, an analyst with Guosen Securities in Beijing, agreed that, by raising lending rates less than deposit rates, the central bank was signalling it was not intending primarily to slow the pace of growth.

”The move is mainly targeting inflation, and the authorities might have reached a consensus that investment growth is not a big problem now,” Lin said.

Consumer prices surged 5.6 per cent in the year to July, the fastest pace since early 1997, because of a spike in the cost of pork, eggs and other foods.

Although non-food inflation fell to 0.9 per cent in July, policy makers are concerned that price increases are already rippling out across the economy.

”It’s also meant to curb fast growth in the stock market, which is now at historical highs and is rising very fast,” Lin said.

The main Shanghai share market is up 80 per cent this year on top of a 130 per cent leap in 2006.

Lin said bank shares were likely to fall hard on Wednesday in response to the rate rise.