Lujiazui Breakfast: News And Views About China Stocks -- April 18

Investors in China’s main financial district are talking about the following before the start of trade today: 

Domestic shares that fell yesterday may rise today following the big overnight rally in the U.S. on global recovery hopes.  The main index  of the Shanghai Stock Exchange fell by 0.9% yesterday in part worries about China’s own economic growth. The Commerce Ministry reported yesterday that direct foreign investment in China fell by 2.8% from a year earlier in the first quarter, the latest signal of easing in the country’s expansion as global fallout from Europe’s financial crisis continues.

Energy- and resource-related companies are in the news today. In Hong Kong, shares in Cnooc may rise after it yesterday confirmed the discovery of an oilfield in the Bohai area. Its shares rose by 1.5% on the news overnight in New York.  Shares in zinc-processing concern Sichuan Hongda, controlled by Chinese billionaire Liu Canglong, were suspected in Shanghai today in connection with the announcement of an overseas acquisition.  

In the mining equipment industry. Caterpillar, the U.S. construction equipment giant, said overnight that it has received permission from China’s Ministry of Commerce to buy Hong Kong-listed ERA Mining, a Chinese mining equipment maker.  (See related story here.) Caterpillar’s purchase followed a recent investment in Hong Kong-listed International Mining Machinery by Joy Global of Milwaukee.    China’s second-richest man, Liang Wengen, controls Hong Kong-listed Sany Heavy Equipment International, another industry player in the China.  

Domestic traded shares in Sany Heavy Industry, also controlled by Liang, along with rival Zoomlion Heavy Industry declined by 2.4% and 3.3% yesterday on a report in the China Business News that said slowing domestic demand in China for construction equipment is leading the two supplier-manufacturers to compete for customers by offering equipment with no down payment.  The approach carries risk to the seller.

China’s real estate market may be under pressure, but that may represent a good time to buy if you have cash.  Soho China, the Hong Kong-listed real estate developer controlled by Beijing billionaire couple Pan Shiyi and Zhang Xin that has about $2 billion of cash on its books, said yesterday it had lined up the company’s 11^th investment project in Shanghai since it entered the market here in August 2009.   It’s shares rose by 0.3% on the news. (See related story here.)  

Among companies posting first-quarter earnings today, Shenzhen-listed Apple supplier GoerTek said revenue in first three months of 2012 was 980 million yuan, or $156 million, up 60% from a year earlier. Net profit was 115 million yuan, or $18 million, an increase of 94%. Chairman Jiang Bin ranked No. 804 on the 2012 Forbes Billionaires List with wealth of $1.6 billion. 

Shenzhen-listed mobile phones and digital electronics retailer Shenzhen Aisidi said today its revenue in first three months of the year climbed by two-thirds to $696 million.  However, it posted a loss of $12.5 million on inventory cleaning.  Its partners include Samsung, Apple, Motorola and Huawei. Co-founder Huang Shaowu ranked No. 1075 on the 2012 Forbes Billionaires List with wealth of $1.1 billion.

Also in the retail industry, Better Life Commercial Chain lost 2.2% yesterday after announced it plans to sell up to 60 million new shares and raise up to $192 million to expand its retail breadth. It will purchase two small department store properties, and also add 40 supermarkets– 34 in Hunan and 6 stores in Jiangxi – over the next two years. The company had 119 supermarkets and 19 merchandise stores at the end of last year that generated sales of $1.3 billion. Chairman Wang Tian with his wife ranked No. 295 on the 2011 Forbes China Rich list with wealth of $620 million.  (See related storyhere.)

In U.S. overnight trading, shares in Dangdang, a leader in China’s cutthroat e-commerce business, lost another 1.7% last night after plunging 15% a night earlier on word that its CFO would resign. Chinese solar stocks had a big night on hopes they would benefit from news of plant closures in Europe by First Solar.  Among the gainers, Suntech rose by 3.3%.