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Snippets, Snipes & Snides
8 -12 June 2006

China Bourses Sent Sprawling On More Share Sales
A raft of expected sale shares by Chinese corporate majors led by the Bank of China threatens to cool Asia's best performing stockmarket as liquidity fears return to dog investor confidence. The nation's second largest lender, oil giant PetroChina and flagcarrier Air China are among some of the largest mainland companies that are preparing for or mulling initial public offerings (IPOs) on home bourses. But news that Bank of China had applied for a US$2.5 billion listing only a week after raising US$11.2 billion in its Hong Kong float sent domestic mainland bourses crashing last Wednesday to their biggest single-day loss in four years. Chinese share prices continued their downward spiral last Friday, losing 2.49% in another sell-off that left the market down about 7.0% on the week. Bank of China's proffered sale, which won regulatory approval late Friday, would make it the heftiest since the nation's largest oil refiner, Sinopec, pulled in 11.8 billion yuan (US$1.5 billion) from its offering in Shanghai five years ago. To stop the kind of financial hemorrhaging that saw the domestic stock markets hit eight-year lows last year, authorities imposed a freeze on new public offerings last year. The objective was to shore up investor confidence while regulators rammed through painful but necessary restructuring of state-owned share enterprises, which would effectively make Chinese companies public. The government had been trying to sell this plan to the public for years, but had previously balked as mention of the changes would send the country's two exchanges into a tailspin on fears that investor holdings would be diluted. Nevertheless, Beijing last year pressed ahead, commanding companies to sell the state's two-third ownership in listed enterprises by generally offering up compensation to public shareholders, usually in the form of free bonus shares. Of the more than 1,300 listed companies trading on Chinese bourses, about 80 percent of the state groups have now completed or put forth reform plans, emboldening regulators to announce in April the reinstatement of IPOs. Naturally the plans are excellent by the authorities, and the massive correction actually would serve the economy well as their main concerns is over the proerty boom, which desperately needs to be subdue. This may be one of the better tools, better of two evils.

Malaysia Finance FAQs
Why Salvatore Dali? Because Salvador Dali has been taken by someone, and Dali is my favourite artist. Actually used to sell Dali's lithographs in a swanky shop in gay Paddington. Used to cost the owner about US$50-100 to import each lithograph in, and the owner has its own framer downstairs, and we could push it out retailing at A$800 - A$1,500. Best seller was The Wailing Wall, which was a must for most Jewish people living in Sydney.

Baby Steps Kudasai
Japan said its gross domestic product grew 0.8% in 1Q06 from the previous quarter, faster than the initial growth estimate of 0.5% growth. On an annualised basis, the world's second-largest economy grew 3.1%, up from 1.9%in the preliminary estimate, the Cabinet Office said. The revision provided evidence the nation was on the right track to recovery, despite stock market turbulence last week. These and many other indicators are reasons why there will be buying on dips across the global economy. Its just that when correction comes, it gathers one and all into a sandstorm and they could only see sand, and not the temporous nature of the storm.

Cathay & Dragonair Forces Competitors To Find Partners
The takeover would make a combined Cathay and Dragonair dominant as feeder to and from mainland China through Hong Kong, which currently accounts for around 70% of arrivals in China. Dragonair serves 23 mainland cities from Hong Kong, while Cathay - ranked 16th-largest in the world in terms of revenue passenger kilometers and a member of the "oneworld alliance" - has been limited to servicing directly only Beijing and Xiamen. The link-up will attract even more transit passengers on Cathay and Dragonair through Hong Kong. There is no real equivalent of the Cathay- Dragonair combination. Mainland carriers will be the hardest hit. Air China, China Eastern and China Southern are the key mainland players. The takeover is very bad news for China Eastern and China Southern. The two mainland airlines' Hong Kong-listed shares have fallen considerably since speculation began that Cathay would take over Dragonair. China Southern, which operates out of Guangzhou, has fallen more than 20% in the year to date, while China Eastern has dropped nearly 9% during the same period. In the past five days, China Southern has dropped nearly 8%, while Cathay has risen by a similar amount. China Southern and China Eastern will need to double their efforts to find foreign partners. To a certain degree, Air China has a partner in Cathay. Apart from Cathay, the other two big Asian carriers are Singapore Airlines and Emirates, especially for China Eastern. The Shanghai market is an especially attractive catchment area, particularly for corporate travel, which Singapore Airlines is focused on. That leaves China Southern as a bit of an orphan, possibly, but Emirates is expanding very aggressively and needs volume. A partnership between Emirates and China Southern would certainly make a lot of sense. Air China has been in talks to join the Star Alliance, but that may change now it is taking 10.16% of Cathay in the Dragonair transaction. Oneworld's eight members - Aer Lingus, American Airlines, British Airways, Cathay Pacific, Iberia, Finnair, LAN and Qantas - have a combined network of 600 destinations. Budget airlines, including Robert Yip's CR Airways, Stanley Ho's Hong Kong Express, and the fledgling Oasis Hong Kong Airlines run by ex-Dragonair chief executive Stephen Miller, are also gunning for a slice of the action. Oasis - which, seeing high passenger volumes - had bought two Boeing 747s to run long-haul routes from October, was in talks with mainland carriers for codesharing. But the upstarts will have a tough time emulating Dragonair's success.


12invest said…
Hi Dali,

I must admit that I had discovered two gems by reading your blog, namely Faber and D&O. However, I bought D&O at the height of the rally, and now I am left with a dilemma of whether I should hold on to D&O.

I have a blog at, if you have some time, feel free to pay me a visit and let me know of your opinion. BTW, I would appreciate if you could add my blog to your link list, I have already add yours.
Salvatore_Dali said…
sure thing

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