TODAY'S BRIEFS Update - 30 October, 2008

TODAY'S BRIEFS

Central bank cuts interest rates again
China's central bank cut lending and deposit interest rates for the third time in six weeks to shore up confidence in the country's economy, the Wall Street Journal reported. Banks' benchmark one-year lending rate was trimmed 0.27 of a percentage point to 6.66%, while the one-year deposit rate was cut by the same amount, to 3.60%. The central banks of the US, Japan, Europe and the UK are all expected to continue lowering borrowing costs in the coming days. The reductions come as domestic firms report disappointing third-quarter results. Overall, China's economy grew 9% year-on-year in the third quarter, the slowest pace in five years.

Bank of China sets aside $832m for bad loans
Bank of China (BOC) has set aside US$832 million to cover bad debts in the third quarter, a move that cut its profit gains to 3.21%, the South China Morning Post reported. BOC has been the mainland lender hardest hit by the global financial crisis, with impairment losses for the first nine months totaling US$3.8 billion, which exceeds the money it had set aside for crisis-related securities by 28%. BOC's third-quarter profit was US$2.6 billion, a 3.21% increase year-on-year, but down from a record 43% year-on-year profit growth for the first half of the year. Despite BOC's higher exposure to bad loans overseas, some analysts believe the bank's asset quality prospects are better than other Chinese banks' due to BOC's lower exposure to the ailing domestic commercial property market.

PetroChina, Sinopec post differing 3Q results
PetroChina, China's largest state-owned oil and gas producer, posted a 29.9% year-on-year increase in third-quarter profits, while rival China Petroleum & Chemical Corp (Sinopec) saw a 38.7% decline over the same period, the South China Morning Post reported. Sinopec was hurt by rising crude oil costs, as it imports about 72% of the crude oil it needs for refining, whereas PetroChina imports only a small portion. PetroChina was helped by higher oil prices, higher output and government rebates on value-added taxes charged on crude oil. However, profit from PetroChina's chemicals division is estimated to have dropped 75% to US$117 million from the second quarter, as global chemicals profit margins deteriorated.

Beijing told insurers to buy more shares
Beijing ordered the country's largest insurance companies to buy more publicly traded shares earlier this month to help support the flagging stock market, the Financial Times reported. On October 17, the China Insurance Regulatory Commission summoned the leaders of China's largest state-controlled insurance groups and told them to play a stabilizing role in the stock market, according to people with knowledge of the meeting. Since then, Chinese insurers have sharply reduced their net sales of publicly traded stocks. China Life, Ping An and China Pacific, the country's three largest insurers, reported large falls in third-quarter profits, driven by investment losses from the stock market decline.

Courier companies worried by postal law
Foreign express-delivery companies operating in China including DHL, FedEx, TNT and UPS are fighting new legislation they say will undermine their ability to compete in the market for delivering documents and packages domestically, the Wall Street Journal reported. A new provision in the draft version of China's Postal Law forbids foreign companies from investing in the domestic letter delivery business. Foreign delivery firms, most of which have been operating in China through joint ventures or other local operations, fear that the provision will make it harder to compete with China Post, the country's state-owned postal service. China's legislature says it will accept comments on the law until November 30. Total revenue in China's postal system was US$12.7 billion last year, with express delivery accounting for more than a third of the total.

Boeing: China will need 3,700 planes by 2028
US airframe maker Boeing said it expects China to need 3,710 new commercial aircraft, worth about US$390 billion, over the next 20 years, AFP reported. China is the fastest-growing aviation center in the world and accounts for 41% of all airplane demand in the Asia-Pacific region, a Boeing spokesman said Wednesday. The single-aisle market would account for 70% of the demand, while demand for larger aircraft like 747s would be limited to about 100 planes. Earlier this week, Embraer, the world's third-largest aircraft manufacturer, predicted China would need 883 regional planes over the next 20 years.

Yanjing lowers price of private share placement
Beijing Yanjing Brewery, China's third-largest brewer, said it would lower its asking price on a planned private share placement for the second time to help persuade uneasy investors, the South China Morning Post reported. Yanjing dropped the per-share price to RMB10 (US$1.46) from the RMB17.88 (US$2.61) it was asking for in May. The company is aiming to sell as many as 110 million shares on the Shenzhen exchange, where it is listed. The share sale is pending regulatory approval. Shares of Yanjing have fallen 55.05% this year, and closed yesterday down 1.61% at RMB10.41 (US$1.52).