[B]China Reduces Export Rebates, Hopes To Trim Excessive Gap[/B]
As previously speculated, it was announced today that China will vastly reduce export rebates on almost 3,000 products in order to curb the widening trade surplus. The repeal on rebates, which begins on July 1st, would also stand as attempts to calm what seems to be escalating pressure from global trade partners as China?s trade surplus continues to be a concern for nations in Europe and the US. Incidentally, the decision follows recent legislation by US senators last week that would allow for steeper duties on China imported goods and materials. Included in the lot of rebate repeals have been products such as toys, textiles and paper according to the finance ministry. All three products have recently been under intense scrutiny by US trade officials, with some measures to even ban the distribution of products on US soil. As a result, although positive for trade relations, the decision will more than likely stand as a temporary solution with US representatives clamoring for more. Competitive fears still loom over the fact that the world?s fourth largest economy continues to harbor a considerable trade advantage and surplus, likely to expand to a record $257 billion according to recent estimates by the Asian Development Bank. The notion will spell strength for the yuan in the intermediate term as it boosts further fodder for revaluation efforts.
[B]Stocks In China Reach Record[/B]
Continuing the 10 day stretch, out the past 11 sessions, Chinese stocks rose and pushed the benchmark higher to record levels in the overnight. Boosted by expectations that further buying will be supportive for the benchmark, investors continued to push the benchmark CSI 300 higher. For the day, the index was able to add 25.43 points, closing 0.6 percent higher at 4,253.00. Interestingly enough, the index has regained losses that stemmed from the second biggest selloff of the year, when stocks tumbled on a tripling of taxes on trades. Obviously showing investor resilience in the face of volatility, the index showed considerable strength supported by benchmark shares that rose to daily limits. Youngor, the men?s clothing maker, added 2.95 yuan to climb to 32.41 as China United Telecommunications added 0.15 yuan to close at 6.15 yuan.
[B]Regional Markets Quiet After Yesterday?s Advance[/B]
Asian markets calmed a bit following record pushes seen yesterday. Aside from Hong Kong markets being closed on a public holiday, Singapore markets continued to advance higher, although not by a lot, in the overnight session. The Straits Times Index stood little changed at the close, remaining at 3,629 and higher by almost 6 points.
[B]Microsoft Announces Acquisition[/B]
Considered a massive stepping stone in the Chinese consumer market, Microsoft today announced that it will acquire one percent of Sichuan Changhong Electric Co of China. The deal, valued at $12.3 million, would include the cooperation to form a strategic alliance where the two companies would develop and market digital home entertainment products in the country. Although previously attempted by other companies, sentiment is positive for the recent attempt as markets have shifted to maturity, allowing for this type of investment to flourish. Incidentally, the deal would also attempt to free up the second largest internet market after the US as technology upgrades are likely to increase connectivity speeds. Yet another example of foreign companies? interest in the Chinese consumer market, the Microsoft announcement is surely to be followed by others, boosting the demand for yuan in currency conversions.
Click here for pdf