TODAY'S BRIEFS 17 July, 2008

TODAY'S BRIEFS

China faces worst power shortage in four years
Nearly half of China's provinces have introduced electricity rationing in what is being described as the country's worst power shortage in at least four years, the Financial Times reported. Rising coal prices and government-set electricity tariffs have contrived to force dozens of small power plants to shut down in the face of mounting costs. The electricity shortfall - which analysts say might surpass that of 2004 when rocketing demand outstripped supply - is expected to pose a threat to China's continued economic growth. Despite Beijing raising fixed electricity tariffs by about 5% last month, BNP Paribas estimates that prices are still 30% lower than the current coal price would imply. Coal prices have doubled since the start of the year.
For more on the challenges China faces in supplying energy, please see the cover story from our June issue.

Mainland stock index becomes world's worst performing
China's benchmark CSI 300 Index became the world's worst performer this year after falling 3.8% on Wednesday to close at 2,745.60 points, Bloomberg reported. The index is now down 49% so far in 2008, overtaking Vietnam, which has lost 48% in value. Confidence in the markets has been eroded by concerns about slowing growth and government cooling measures designed to rein in inflation. Banks were among the biggest losers yesterday, with shares in China Merchants Bank and Shanghai Pudong Development Bank slumping 4.1% and 4.7% respectively. Meanwhile, the Shanghai Composite Index fell 2.7% to close at 2,705.87.
China's inflation moderates to 7.1% in June
China's consumer price index, the main gauge of inflation, rose by 7.1% in June, a significant drop on the 7.7% figure posted in May, AFP reported, citing an announcement made by the National Bureau of Statistics (NBS) on Thursday. It was the second successive monthly decline following April's 8.5%. Inflation came to 7.9% for the first six months of 2008, with food prices the main driver, rising 20.4% during the period. The NBS also announced that China's GDP grew by 10.4% during the first six months compared with the same period a year ago. No figure was given for second-quarter growth. The economy expanded by 10.6% in the first quarter, following a full-year rise of 11.9% in 2007.

China sees rapid growth in online spending
China's internet users spent US$37.5 billion in the first six months of 2008, up 60% year-on-year, AFP reported, citing statistics released by the Data Center of China Internet, a research institute. Spending for the whole of 2008 is expected to rise by nearly 50% over the previous year, reaching US$86.2 billion. On average, each internet user spent US$31.01 per month through the internet, 13.9% more than a year earlier. The research institute put the fast growth down to China's rapidly expanding internet population and rising consumption. Total internet users hit 221 million in February as China overtook the US to become the world's largest internet market by users. The research institute predicts that China's internet users will number 263 million by the end of 2008, compared to 210 million in 2007.

Singaporean developer creates $1bn commercial property fund
Singapore-based CapitaLand has set up a US$1 billion private equity fund focusing on commercial property projects in China, Bloomberg reported. The Raffles City China Fund will initially have assets worth around US$2 million. These assets include CapitaLand's 55.9% stake in Raffles City in Shanghai as well as stakes in three projects being built under the same brand in Beijing, Chengdu and Hangzhou. CapitaLand will hold 50% of the fund with the remainder being made by financial institutions and pension funds in Asia, Europe and North America. CapitaLand said the fund, which has the option of closing in December, may grow to as much as US$1.3 billion.

Citigroup to issue debit cards in China
Citigroup announced on Wednesday that it had won regulatory approval to offer debit cards to customers in China, the Wall Street Journal reported. Foreign banks were first allowed to take yuan deposits in 2003 and started offering local currency services to individual customers in 2006. However, the regulator has been slow in permitting lenders to provide debit cards or ATM cards to their local-currency account holders. Until now, participation has been limited to joint venture credit card operations with local partners. By the end of 2007, 169 Chinese financial institutions had issued 1.5 million bank cards, according to China Unionpay. There were 120,000 ATMs were in operation across the country and 740,000 merchants accepted payment with plastic.

China business behind Yum's profit surge
Yum! Brands, the owner of KFC, Taco Bell and other fast food chains, saw its second-quarter income rise 4% on the back of strong sales in China, the Wall Street Journal reported. Profits totaled US$224 million for the quarter ending June 14, over US$214 million the previous year. The company's same-store sales in China jumped 14%, while overall sales grew 43% as 95 new units were opened. In the US, same-store sales grew 2%. Yum expects overseas sales to account for 70% of its total profit in 10 years, compared with 55% today. The company's China-based restaurants currently deliver over a quarter of total operating profits.

Riot police quell protest over school collapse
Riot police detained more than a dozen parents on Tuesday morning as they tried to disperse a crowd of hundreds who lost children in school collapses during the May 12 earthquake, the Wall Street Journal reported. Parents had gathered outside a local government office in Mianzhu City, Sichuan province, to hear the results of an investigation into why so many school buildings failed to withstand the quake. The parents said they waited in vain for a report to be made public before the riot police arrived at around 11am. In recent weeks, local authorities have stepped up efforts to stifle protests regarding the school collapses for fear that China's image will be damaged ahead of the Olympics, the paper reported. The government has said the quake destroyed nearly 7,000 classrooms and dormitories.


Market recap:
 Shanghai: shares drop 2.65%, driven by weakened banks, property developers
 Hong Kong stocks bounce modestly from Tuesday's
 Wall Street jumps on stronger financials, falling oil
Macro-economy:
 City's GDP grows 10.3% in 1H
 China to invest 12.7 bln yuan in upgrading lower-yield farmland
 Smaller insurers can get stocks nod
Sectors & companies:
 Energy: VAT refund on fuel imports to continue
 Medical: profits up 40% in the first five months
 China Life Insurance (601628) says first-half premiums hit 182.1 billion yuan
 Huaxin Cement (600801) says first-half net profit grows 74.42 pct
 Air China (601111) interested in a stake in AUA---report