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Heads Up

Trade disputes to the fore as markets show weakness

Trade wars and taking a breather may be the themes in China business this week, as equity markets, although looking strong, show signs of needing consolidation.

Hong Kong's market showed signs of tiredness late last week, with the benchmark Hang Seng Index closing 39.24 points or 0.19 per cent down at 20,340.97 on Friday, taking the cue from New York's Dow Jones Industrial Average.

Investors are worried that an interest rate cut may not be a sure thing, in which case corporate expansion and capital expenditure will be more expensive.

Markets, particularly in China, will once again be trying to diagnose the health of the US economy from this week's government data. March retail sales will be released today, and last month's consumer price index will be out tomorrow.

It may become harder for US consumers to find 'Made in China' products if the trade spat between the US and China escalates further. The row, which centres on subsidies, copyright infringement and a lopsided trade imbalance, is likely to cause further ripples through this week's markets and business developments.

It is causing pressure on the US dollar and could undermine shares of other Chinese companies in industries deemed vulnerable to further US protectionist measures.

Some of these issues could be fodder for interesting discussions and sound bites from the Boao Forum for Asia annual conference, held this coming weekend in Hainan province.

Minister of Commerce Bo Xilai and China Banking Regulatory Commission chairman Liu Mingkang will be attending, along with Hong Kong Financial Secretary Henry Tang Ying-yen.

Top executives from all of China's large companies will be there, along with Microsoft's Bill Gates and leaders of top corporates from across the region.

Most of the executives who will be speaking and huddling in sideline meetings have a significant amount at stake in the China-US trade flow.

Smaller but more IPOs

Initial public offerings coming through Hong Kong's market this year may be smaller than in the past, but it is predicted there will be more of them to make up for size.

China Citic Bank, the mainland's eighth-largest lender, will launch the retail portion of its offering today. Its IPO is expected to raise up to US$5.4 billion via a dual Hong Kong and Shanghai listing, and mom-and-pop investors will snap up the shares as fast as they can.

Country Garden Holdings, which is raising as much as HK$12.9 billion in the largest IPO by a mainland property developer, will begin trading on Friday. With investors getting a thumbs-up on the deal from property tycoon Lee Shau-kee, Country Garden is this year's largest and probably hottest offering, so its market debut will be worth watching.

China Molybdenum, which is raising as much as HK$7.3 billion through a share sale, will continue offering its shares to retail investors until Wednesday.

Shun Tak heads results galore

On the earnings front, Shun Tak Holdings will announce its results today. There's a sizable crop of natural resources companies announcing their results this week, with China Coal Energy and China Oil & Gas reporting tomorrow, along with China Life Insurance.

On Wednesday, Jiangxi Copper and Tianjin Port Development Holdings report earnings, with Regal Hotels International Holdings and Tsingtao Brewery following suit on Thursday. China Merchants opens its books on Friday.