Shanghai back in favour - Brief Article - Statistical Data Included

Business Asia, Sept, 2000

THREE YEARS after the Asian economic crisis drove foreigners out of China's bedraggled share markets, they have begun creeping back in.

A spate of foreign buy orders on Shanghai's stock exchange in recent sessions has set tongues wagging across the red carpeted floor of the bourse. Orders for hard currency B shares are not particularly odd in China these days: B and domestic A share indices have rocketed an average of 57 per cent since the start of the year, the best performers in the world.

But foreign buyers had been rare.

Now, old customers are reviving long-dormant accounts to catch the market surge and in hope the B shares, which trade at a discount to A shares, will rise until the two types of issues are merged. And overseas investors are also returning in a new guise. Foreign fund management firms are sealing co-operative agreements with Chinese partners, hoping regulators will eventually allow them to tap the A share market, now open only to domestic investors.

Analysts expect B shares to continue to attract foreign buyers, and domestic fund managers to attract partners, as China steps up the pace of capital market reform and draws closer to entry in the World Trade Organisation.

Foreigners headed for the market exits in 1997 when the Asian crisis set off fears China would devalue its yuan. But the foreign drought has ended.

(*) AUSTRALIA

Telecommunications giant Telstra is expected to pursue a spin-off of an Asian internet infrastructure company in partnership with Hong Kong Telecom. The joint-venture arrangement with HKT and its new parent company Pacific Century CyberWorks is thought to involve possible revenues of more than A$3.5 billion by 2005. The new global internet company, in which Telstra is contributing undersea submarine cable assets, was first mooted earlier this year when Telstra announced its new alliance with Richard Li's PCCW. Telstra was thought to be putting the final ink on the deal as Business Asia went to press.

(*) CHINA

The Chinese Government is determined to improve water and electricity supply facilities, communication facilities and roads in rural areas in a bid to boost the rural consumption market. A survey has found that ageing power grids, high power prices, weak TV signals and lack of tap water are the main factors hindering rural consumption. If China lowers the price of power in rural areas by 40 per cent and improves general infrastructure, the number of TV sets per 100 rural households is expected to increase by 10.5 sets to 50 sets compared with 1999.

(*) INDONESIA

Indonesia has taken the internet off its list of industries closed to foreign investment and opened telecommunications provided it is with a local partner. The closure last month of the internet business sparked a furore among the investment community, including locals who said that without foreign funding and expertise the fledgling industry would never get off the ground in Indonesia. The changes came in a new closed investment list. The list was in the form of a presidential decree.

(*) MALAYSIA

Singapore has signalled it wants to mend ties with Malaysia, but stinging remarks by Senior Minister Lee Kuan Yew during a recent visit to Kuala Lumpur might not help. Singapore's founding father ended a four-day visit to Kuala Lumpur saying he was more optimistic than when he arrived that the sibling states could settle thorny differences. But in unusually candid remarks, he said Malaysia's handling of jailed former finance minister Anwar Ibrahim was an "unmitigated disaster". Abdul Razak Baginda, executive director of the Malaysian Strategic Research Centre think-tank, said: "We will have to wait to see the reaction of some people to those comments. If we don't see negative reaction, then there are some strong feelings on both sides that the two countries have to move on and try to settle their differences."

(*) SOUTH KOREA

Most of the 6.1 per cent stake in Hyundai Motor held by group founder Chung Ju Yung is likely to be sold to US-owned investment securities firm Jardine Fleming and Co. Hyundai has already informed its main creditor Korea Exchange Bank and the Fair Trade Commission about the development and will submit Hyundai Motor's separation plan from its mother group as soon as the terms are wrapped up.

(*) THAILAND

The political demise of Prime Minister Chuan Leekpai's key strategist has shaken Thailand's government, but analysts caution against any hasty conclusion that it represents a fatal blow for the ruling Democrat Party. Former Interior Minister Sanan Kachornprasart has stepped down as secretary general of the Democrat Party after 12 years in the job as Chuan's political fixer. Sanan was forced to quit politics after the Constitutional Court upheld an earlier verdict by the National Counter-Corruption Committee (NCCC) that he had filed inaccurate personal asset statements in 1997 and 1998. Sanan, 64, is widely credited for helping Chuan form coalition governments in 1992 and 1997. The Prime Minister has to call a general election by mid-November. "His departure raises a question on whether the Democrats can find an equally capable replacement, without whom there would be less chance for the party to return as the core of the next government," says senior analyst Supavud Saicheua at Merrill Lynch.