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China moves on irregular financing

China is moving to correct irregular behavior in the fundraising of local governments as part of efforts to rein in financial risks amid a firming economy. In a notice released on Wednesday, the Ministry of Finance asked provincial authorities to start examining their financing practices as soon as possible and rectify all irregularities by the end of July, with progress to be tracked by the ministry's local supervisors. The relationship between governments and local financing platforms should be properly handled, and the latter should transform into market-based State-owned enterprises that can stay clear of government intervention. Local governments are allowed to set up investment funds with private companies and conduct public-private partnership cooperation, but debt financing is strictly prohibited.

Insurers' premium up 32.45% in Q1

Premiums received by Chinese insurers rose 32.45 percent in the first quarter, compared with the same period last year, official data showed on Wednesday. Premiums reached 1.59 trillion yuan ($230 billion) from January to March, said the China Insurance Regulatory Commission. By the end of March, the industry had combined assets totaling 16.2 trillion yuan, up 7 percent from the beginning of the year. The commission attributed the steady growth of premium income to better regulation and risk protection. Since the beginning of this year, financial regulators have worked to prevent systemic risks as the importance of financial security grows. Last month, the CIRC announced a targeted campaign against violations to restore market order, with measures against false capital contributions, chaotic corporate governance, irregular investments and fake data.

Higher fuel prices hit airlines

Despite robust passenger growth, most listed Chinese airlines failed to see increased profits in the first quarter due to rising oil prices. All publicly traded Chinese carriers have released their first-quarter reports, and most reported waning profitability as higher fuel costs hit profit margins, the China Securities Journal reported on Wednesday. China Southern Airlines, the country's biggest carrier by passenger volume, saw net profits slump 42.44 percent year-on-year to 1.55 billion yuan ($225 million) in the first quarter, despite a 10.58-percent growth in business revenue to 30.97 billion yuan. Rising fuel prices pushed up China Southern Airlines' operational costs by 21 percent year-on-year. Pressure from higher fuel costs are reflected in other carrier reports.

Two firms lift stake in Santos

Two Chinese firms have increased their combined stake in Australia's No 2 independent gas producer Santos Ltd, taking advantage of a slump in its shares, and together now hold 15.1 percent of the company, Santos said on Thursday. Private equity firm Hony Capital, whose backers include State-sponsored Legend Holdings Corp and Singapore's Temasek, bought 2.3 percent of Santos's shares after the market close on Wednesday. Hony has been working with Chinese gas distributor ENN Ecological Holdings Co Ltd since 2015 to build up a stake in Santos. ENN is Santos's top shareholder.

SmartFinance eyes $1b valuation

SmartFinance, a Chinese internet loans business that judges borrowers on factors including how often they charge their phones, has consulted banks about a possible US listing that could happen as soon as this year. The rapidly expanding company, which anticipates it will reach a $1 billion valuation by the end of 2017, has hired former Cheetah Mobile Chief Financial Officer Andy Yeung to help better manage investor relations and smooth the path to an eventual listing. "We're not a bubble; we're a profitable company," SmartFinance founder and Chief Executive Officer Jiao Ke said. "If you look at our metrics they are actually better than many of these billion-dollar-plus companies. So I think hitting a $1 billion valuation by the end of the year is very reasonable."

Double-deck trains for Philadelphia

CRRC Tangshan Co Ltd, China's first railway equipment manufacturing company, will supply 45 high-speed double-deck trains to Philadelphia in the United States. It is the first time that trains made of stainless steel in China will be exported to North America. According to the company, the trains are expected to be delivered at the end of 2019, and will run through Philadelphia, Delaware and New Jersey. They will cost Southeastern Pennsylvania Transportation Authority 1.1 billion yuan ($160 million), and it may order another 10 more trains in the future.

Apps gain more attention

People are spending more time on mobile apps globally and the trend will continue this year, a new study from research firm App Annie found. The company said that the increase of total time is largely a result of an exploding global user base. From 2015 to 2017, the time users spend on mobile apps increased globally. According to the report, US users spend an average of over two hours per day, while users in South Korea, Brazil, Mexico and Japan showed a more impressive figure of an average of around three hours.

Adidas outpaces Nike, booms online

German sportswear firm adidas reported a bigger-than-expected increase in first-quarter sales and profits on Thursday, as it outpaced archrival Nike North America and China and grew fast online. Adidas also reported a rebound in sales for its struggling Reebok brand, with quarterly growth up 13 percent, compared to just 6 percent in 2016, which adidas said was driven by the training category and retro styles. Adidas said net profit rose 30 percent to 455 million euros ($495.7 million) on sales up 19 percent to 5.67 billion euros, ahead of average analyst forecasts for 421 million and 5.4 billion respectively, according to a Reuters poll. Adidas said growth was particularly strong in e-commerce, with revenues up 53 percent, and in North America and China, where sales grew 31 percent and 30 percent respectively. Nike reported sales rose just 3 percent in North America in the quarter ended Feb 28, while they were up 9 percent in China, falling short of double-digit growth for the first time in at least nine quarters.

US NMI expands faster in April

US nonmanufacturing sectors expanded at a faster pace in April, as the new orders index reached its highest level since 2005. The Non-Manufacturing Index (NMI), which measures activity in the US service sector, registered 57.5 in April, 2.3 points higher than the March reading of 55.2, the Institute for Supply Management said in its monthly survey on Wednesday. The NMI survey covers all nonmanufacturing sectors. A reading above 50 percent indicates the expansion of the service sector. The business activity index increased 3.5 points to 62.4; the new orders component of the index, a signal of future business, rose 4.3 points to 63.2, the highest level since 2005; the employment index edged down 0.2 point to 51.4. Businesses surveyed are mostly positive about business conditions and the overall economy, said the ISM.

Graft probe slows LatAm growth

Ongoing investigations into widespread corruption in Latin America involving Brazilian construction giant Odebrecht has "stalled" infrastructure growth in the region, Moody's said on Wednesday. According to the credit rating agency, the investigations "are slowing major energy and infrastructure development across the Latin American region, creating negative spillovers for governments, companies and banks." Revelations that the company paid hundreds of millions of dollars in bribes and kickbacks to government officials in more than 10 countries in return for lucrative public works contracts have led prosecutors to open the books into past and present projects. "Several infrastructure concessions have been halted and will need to be relaunched as a result of the Odebrecht corruption scandal," Moody's said.

UK manufacturing growth quickens

Growth in the United Kingdom's manufacturing sector picked up pace in April. The Purchasing Managers' Index rose to 57.3 in April from 54.2 in March (above 50 indicates growth), well above the consensus, 54.0, according to Markit/CIPS. March's figure was a four-month low. The output balance rose further still, to 58.4 from 53.5 in March, taking it close to the levels seen at the beginning of the year. Stock of purchases is also rising, and at a record rate. This is the ninth straight month of expansion for the manufacturing PMI, and it only dipped below expansion in July last year, the month after the shock Brexit referendum result. UK manufacturing output was driven higher by the strongest inflows of new work since January 2014, with the domestic market remaining the principal source of new contract wins.

China Daily - Agencies

(China Daily USA 05/05/2017 page18)