Financial Services Talking Points 26-05-2016


Australia missing out on China’s record buying spree

Chinese investment in Australia has dropped off, plunging ­almost 70 per cent in the past year even as the country’s broader international acquisition spree reached record levels. Figures compiled by Credit ­Suisse show China has only acquired $US2.5 billion ($3.5bn) of Australian assets so far this year, down from $US8bn this time last year and representing just a sliver of the $US117bn in outbound deals announced so far in 2016. The downward trend is expected to reverse, with the recent free trade agreement between Australia and China and the continued availability of cheap debt likely to mean the drop in activity was short-lived. The China-Australia free-trade agreement, which came into force in December, removed many restrictions on Chinese ­acquisitions in Australia. China’s acquisition interests had shifted from the big-ticket mining acquisitions that characterized the resources boom towards smaller value deals in sectors more consistent with the country’s transition to a consumer-led economy. Click here for the full article.

China’s SOEs profit decline eases

The profit decline of China’s State-Owned Enterprises (SOEs) are eased in the first trimester this year, as the economy showed signs of stabilization, as official data showed Wednesday. The global profit for these companies fell 8.4 percent year on year to 652.26 billion yuan ($98.8billion) during January-April period, according to statistics from the Ministry of Finance. Profits of SOEs under central government control dropped 6.6 percent while those of locally –administered SOEs slumped by 14.2 percent compared with one year earlier. SOEs in the sectors of oil, chemicals and construction posted substantial profit declines, while coal, steel and non-ferrous metal industries continued to suffer losses. Meanwhile, transportation, petrochemicals and pharmaceutical companies has seen a big profit increase. Click here for the full article.

Morgan Stanley economist upbeat on China growth target

Senior Morgan Stanley economist has predicted China will deliver its annual growth goal this year despite sluggish global economic recovery. The economy expanded 6.7 percent year on year in the first quarter, better than market expectations and in line with an official target range between 6.5 and 7 percent. Weighed on by lackluster exports and investment, the world’s second largest economy is facing a prolonged slowdown. It is normal, according to Morgan Stanley economist, considering that China is transitioning to a more sophisticated model, weaning itself off reliance on investment, upgrading manufacturing and climbing up the industrial value chain. The Chinese currency renminbi, or the yuan, is expected to further depreciate by around 4 percent to 4.5 percent against the US dollar, provided the US Federal Reserve hikes interest rates and China keeps its easing policy. The investment bank has gathered 1,900 elite businessmen and women, investors’ and researchers for its second China Summit, running from Tuesday to Thursday. Click here for the full article.