TODAY'S BRIEFS Update - 29 October, 2008

TODAY'S BRIEFS

Wal-Mart recalls Chinese eggs over tainting fears
Wal-Mart has become the first retailer to recall eggs in China over fears of melamine contamination, AFP reported. Hong Kong authorities earlier said they had found traces of the chemical, which was responsible for the deaths of four infants and the hospitalization of thousands more after contaminating milk powder products, in eggs from the Hanwei Group. Wal-Mart has now pulled Hanwei products from its stories in the mainland, although it stressed that this was nothing more than a precautionary measure. Other supermarket chains, including French retailer Carrefour, have not issued similar recalls. The presence of melamine inside the eggs has raised concerns that the chemical, which is ordinarily used in plastics but can also boost protein levels, has been mixed into livestock feed and spread more widely through the food chain.

Shanghai market buoyed by Asia-wide rebound
The Shanghai Composite Index closed up 2.8% at 1,771.82 points on Tuesday after a rally in other Asian markets wiped out early losses, the Wall Street Journal reported. Property developer China Vanke, which saw its third-quarter profit plunge 13% to US$31.5 million, led the early decline, dropping by as much as 9.2% in morning trading. Vanke eventually closed down by just 1.53% thanks to strong showings by the markets in Hong Kong, Japan, South Korea and Singapore. Hong Kong's Hang Seng Index performed particularly well, jumping 14.4% to 12,596.29. This was the market's biggest single-day gain in 11 years and it came after a five-day, 28% rout, which sent valuations so low that investors stepped in to sweep up the bargains. Vanke's disappointing results did succeed in dragging down Hong Kong-listed property firms, however, with China Overseas Land and Guangzhou R&F both posting sharp losses.

Beijing ups ante on global emissions controls
China called on developed nations on to devote 1% of their GDP to assisting developing nations in the fight against global warming on Tuesday, Reuters reported. Much of the money would be spent on the transfer of "green" technologies, said Gao Guangsheng, head of the National Development and Reform Commission's climate change office. The announcement comes ahead of UN talks due to take place in Poland in December at which negotiations will continue over a successor to the Kyoto protocol, the main provisions of which expire in 2012. China will detail its policies on climate change in an official white paper to be released on Wednesday. Separately, China defended its energy policy following claims in a report by Greenpeace, the Energy Foundation and the World Wildlife Fund that the country's coal dependency is creating hidden environmental and other costs worth more than 7% of its GDP.

Margin trading, short selling may be put on hold
Beijing is poised to delay the launch of margin trading and short selling amid fears that the new mechanisms will increase market volatility, the South China Morning Post reported. The launch was originally scheduled for next month. A source close to the China Securities Regulatory Commission said senior officials believed margin trading and short selling could expose investors to heavy losses. The Shanghai Composite Index is already down 66.33% so far this year. Short selling 2013 whereby investors borrow shares and sell them with the intention of buying them later on once the price has dropped 2013 has been widely blamed for recent volatility in other markets to the point that some governments have banned the practice. It was thought that margin lending 2013 borrowing money from brokerages to buy shares 2013 might help out the struggling markets as brokerages have more cash than equities to lend to clients.

Insurers struggle amid stock market declines
China Life and Ping An Insurance both announced disappointing third-quarter results on Monday, largely due to the impact of struggling stock markets on investment income, Reuters reported. China Life, the country's largest life insurer, saw net profit for the period fall by more than 70% to US$342 million while Ping An posted a net loss of US$1.15 billion compared to profit of US$772 million a year ago. Ping An's deficit came after it booked a charge against its investment in Fortis, the troubled Belgian-Dutch financial group. Ping An also revealed it had lost US$1.81 billion on its investments in the third quarter, a direct result of the Shanghai Composite Index dropping by nearly 70% so far this year. The company 2013 which is now paying more attention to fixed-income assets 2013 earned US$2.5 billion on its investments in the third quarter of 2007.

Aluminum producers call on government for help
China's aluminum producers have asked Beijing to introduce tax breaks and buy up surplus supplies to see them through the current bear market, Bloomberg reported. Most producers are to cut output but Wen Xianjun, deputy chairman of China Nonferrous Metal Industry Association, said this was not enough. "They're hoping for supportive polices such as export tax benefits, an easing in bank lending and even government buying for strategic reserves," Wen said. The entreaties were made at a meeting of 12 aluminum smelters, including Aluminum Corp of China (Chalco), Yunnan Aluminum and Shandong Nanshan Aluminum, and officials from China's commerce and finance ministries on Tuesday. Aluminum prices have fallen by 22% so far this year, undercutting companies' operating costs. Chalco saw its third-quarter profit slump 93% year-on-year.

China, Russia agree to terms for oil pipeline deal
Russian Deputy Prime Minister Igor Sechin said China will provide "considerable" loans in exchange for increased oil supplies as the two countries reached a deal on a new pipeline, the Wall Street Journal reported. Some reports have said the value of these loans could amount to as much as US$25 billion, although Sechin said it would depend on future oil-supply contracts between the companies involved. According to the terms of the pipeline deal, China National Petroleum Corp will build a 965km stretch inside China that runs up to the Russian border and OAO Transneft will construct a 64km stretch on the other side. The oil will be supplied by OAO Rosneft. The pipeline is expected to be completed no earlier than the end of 2009 and will carry around 300,000 barrels of oil each day.

Air China announces third-quarter loss
Air China posted a loss of US$277 million in the third quarter due to disruptions caused by the Olympic Games and poor hedging on fuel prices, Bloomberg reported. It is the first time in seven quarters that China's largest international carrier has recorded a loss. Sales fell 4% to US$2.03 billion as the Beijing-based airline was forced to cut many flights during the Olympics. Meanwhile, jet fuel prices dropped 35% in the third quarter 2013 further bad news for Air China as it was left with contracts to buy fuel for more than the spot rate, having hedged in the wrong direction. Overall spending on jet fuel rose 64% due to the airline's expansion. Air China has a larger overseas network than its domestic rivals, which means it buys more fuel at international prices. The government adjusts fuel prices for domestic routes.