FiNETIK – Asia and Latin America – Market News Network

Asia and Latin America News Network focusing on Financial Markets, Energy, Environment, Commodity and Risk, Trading and Data Management

Latin America: Investors News Letter 18 April 2013


Mexico Peso Declines as U.S. Earnings Crimp Outlook for Exports

Mexico says Nestle to sell Pfizer baby food business

MEXICO CITY – Swiss food giant Nestle will sell the assets of U.S. pharmaceutical company Pfizer’s baby food business in Mexico, a business it acquired globally in an $11.85 billion deal last year, Mexico’s competition watchdog said on Monday.

Analysis: Mexico’s smaller homebuilders set to gain as top three struggle

MEXICO CITY – Mexico’s top three homebuilders, facing heavy debt burdens and holding land where Mexicans no longer want to live, will sell fewer homes this year, leaving a market wide open for smaller rivals or even private equity funds to snap up business.

Mexican manufacturing: from sweatshops to high-tech motors

SILAO, Mexico – Made in Mexico is increasingly more likely to mean cars than clothes as the country’s manufacturing sector moves away from the low-skill, high-volume production lines of the past toward more sophisticated products.

VIP Interview: Enrique Peña Nieto, forging the future

Enrique Peña Nieto, President of Mexico, on a new spirit of democracy and cooperation, and the economic future of Mexico.


Itau Bet on Stocks Outside Brazil Leads Latin America Funds

QItau Unibanco Holding SA has found a winning strategy for the Itau Latam Pacific mutual fund: avoiding shares from the bank’s home country, Brazil.

 Brazil’s Votorantim Cimentos files for $5.4 billion IPO

Votorantim Cimentos S.A., Brazil’s biggest cement producer, on Wednesday filed with regulators to raise up to $5.4 billion in an initial public offering of its units.

Brazil clears Pão de Açúcar’s appliance stores deal

BRASILIA/SAO PAULO – Grupo Pão de Açúcar SA , Brazil’s biggest retailer, won regulatory approval on Wednesday for its 2009 purchase of the Casas Bahia and Ponto Frio appliance chains in exchange for selling less than 8 percent of their store fronts.

Brazil Indian-farmer standoff intensifies, tribes storm Congress

BRASILIA – Brazilian Indians are trying to derail a congressional proposal to change the way indigenous lands are recognized, intensifying a standoff between the powerful farm sector and a carefully protected minority by literally storming the floor of Congress.

Special Report: Rough justice as Brazil tries to right past wrongs to Indians

MARAIWATSEDE, Brazil – Damião Paridzané was nine years old in 1966 when the Brazilian Air Force loaded him and hundreds of other Xavante Indians onto a cargo plane. | Video

UK-based TMO Renewables building cellulosic fuel plant in Brazil

SAO PAULO – UK-based TMO Renewables said on Friday it plans to build Brazil’s first commercially viable second-generation ethanol plant, betting on the South American country’s need for non-food-based biofuels.

Brazil’s Embraer looks to shock Lockheed with price of cargo jet

RIO DE JANEIRO – Brazilian planemaker Embraer SA is looking to shock rivals with the price of its KC-390 military transport plane when it starts booking firm orders within the next 12 months, according to a senior executive.

Higher volumes and more investment for Brazilian railfreight
INTERNATIONAL RAILWAY JOURNAL – Despite a slowdown in economic growth, Brazil’s freight railways invested nearly Reais 4.9bn ($US 2.4bn) in new infrastructure and equipment last year, a 6.6% increase over 2011,


British Firms Explore Trade Opportunities in Mexico and Colombia

A four-day trade mission to Mexico and Colombia by medium-sized British businesses took place in March, focusing on high value opportunities in key sectors.

Jamaica’s decades of debt are damaging its future

The latest IMF loan does not ‘rescue’ Jamaica, whose debt must be written off if its people are to take control of their economy

 The Logistics Hub Project and Jamaica’s Development
An ideal location midway between North and South America, in close proximity to the Panama Canal contributes to this advantage. The Panama Canal will be widened by 2015 to accommodate wider ships and Jamaica hopes to capitalise on this by expanding its port facility and affiliated infrastructure spread over four south coast parishes: namely Kingston, St Catherine, Clarendon and St Thomas. An IDB (2010) study on the productivity of the LAC region concluded that “ports and airports are grossly inefficient.

Latin America’s top port faces logistical woes
Santos’ cargo handling volumes made a strong start to 2013, with the port hitting a record high of 7.9 MM tons, up 27 percent year-on-year, according to Santos’ Port Authority CODESP. If the trend continues, the port is expected to close 2013 with total cargo traffic of 109 MM tons, up from 104 MM last year and 97 MM in 2011. But a record soybean harvest this year has clearly overwhelmed its storage and loading capacity. “It seems that our infrastructure can’t cope with the growth in grain production,” said Sergio Mendes, executive director of the Brazilian Cereal Exporters Association (ANEC). Last month, the logistical nightmare reached epic proportions, with a 64-kilometer traffic jam of trucks waiting to unload their soybean cargo outside Santos port. And the port congestion and resulting shipment delays led Sunrise Group, China’s largest soybean importer, to cancel an order to buy 2 MM metric tons of Brazilian soybean.

Latin America’s Largest PV Projects

As of April 1, 2013, 9.8 gigawatts of large-scale PV projects had been announced in Latin America and the Caribbean. Currently, the generating capacity of projects in operation is just 114 megawatts. Of the 9.8 gigawatts’ worth of announced projects, 731 megawatts have signed off-take agreements of some sort (power purchase agreements, feed-in tariff contracts, etc.) and a further 168 megawatts are under construction. These large numbers have generated a lot of hype for various Latin American markets, in particular, for Chile, Mexico, and Brazil.

Filed under: Banking, Brazil, Central America, Chile, Colombia, Energy & Environment, Latin America, Mexico, Peru, Risk Management, , , , , , , , , , , , , , , , , , , , , , , , ,

Latin America: Investor News Letter 14 December 2012


With a little help from my friends; Mexico´s new Government
The rise of Mexico The US needs to look again at it´s increasingly important neigbour
Mexico’s New President Offers Much to U.S. Investors
Macquarie Mexico IPO Offers REIT Where Murder Reigned
Thor Urbana Capital Launches $500M Investment in Mexico
HSBC became bank to drug cartels, pays big for lapses
Pemex Sues Siemens Claiming Bribery in Refinery Project
How to Invest in Mexico
Peru, Chile and Mexico are Societe Generale’s favourites for LatAm investments Cemex crumbles and Latin America starts to look weak
Brazil stimulates construction to spur economy
Deutsche Bank Reduces Investment Bank, Research Teams in Brazil
Brazil Subsidizes Uncertain Shipyard Success
Rousseff Seeks Investment From Spain
Alstom handed Sao Paulo infrastructure contract
GE to Build Oil, Gas Facility at LLX’s Brazil Acu Port
New trains for World Cup host cities
Brazil´s Ceará to receive $66.5 million IDB loan to improve urban infrastructure and business environment

Latin America

LatAm Wealth Management Overview
The world has gotten wealthier, but not the whole world. The engine of growth for private wealth is by far the emerging markets such as LatAm and, particularly, East Asia ex-Japan, which is outpacing the rest of the world by a long shot …

South American airports need more investment: ALTA head
Can South America Become the New European Union?
IDB Approves $153 Million in Loans to Set Up IDB-China Eximbank Equity Investment Platform


Argentina May Abandon International Court, Treaties Over Debt Ruling
Argentina raising energy tariffs to fund investment
Argentina’s YPF buys majority stake in natgas distributor


Chile approves Endesa 740 MW coal-powered project


Colombia is Fast Becoming a Rising Oil Giant in Latin America
Southern Cross Group Invests in Sociedad Portuaria Regional de Barranquilla (Columbia)
Holcim to double capacity in Colombia by building new US$600mn cement plant
As Panama Canal expands, Latin America rushes to be ready
Embezzlement stalling Colombia’s infrastructure development: Minister
Infrastructure in Colombia


Peru Is Clear Investment Destination In Latin America: Minister
Peruvian ports in peril?
FiNETIK News Summarier, 14.12.2012

Filed under: Argentina, Brazil, Central America, Chile, Colombia, Energy & Environment, Latin America, Mexico, News, Peru, Risk Management, Wealth Management, , , , , , , , , , , , , , , , , , ,

Cemex aims for $950m Latin American float in Colombia

Cemex, the Mexican cement producer, hopes to raise up to $950m from the partial sale of its Latin American subsidiary, people familiar with the deal told the Financial Times on Monday.

The company has set a price range of 11,000-13,500 Colombian pesos a share for the sale of about 24 per cent, or 126.6m shares, in Cemex Latam Holdings, Cemex’s Central and South American unit, in a forthcoming initial public offering on the Colombian stock exchange.

FT related CEMEX news:
The IPO of Cemex Latam, which includes Brazil, Colombia, Costa Rica, El Salvador, Guatemala, Nicaragua and Panama, is part of the company’s ongoing efforts to pay down its high debt. As of end of September, gross debt, which includes perpetual notes, stood at $17.7bn.

The planned IPO follows a recent refinancing agreement for about $7bn in loans, which extends maturities by three years from 2014 to 2017. At the time, analysts welcomed the agreement, saying that it bought the company valuable time to allow global cement markets to recover.

“The refinancing lays to rest any residual concerns about the company’s solvency,” one analyst who asked not to be named, told the FT recently.

That, coupled with positive results during the third quarter – Cemex said that earnings before interest, taxes, depreciation and amortisation (ebitda) between July and the end of September grew 9 per cent compared with last year to reach $730m, the highest ebitda generation in three years – has fuelled a rally in the company’s share price this year.

For years, Cemex was considered one of the most successful “multilatinas” as Latin American multinationals are known, as it embarked on a 20-year acquisition spree that turned it into the world’s third-largest cement producer by volume.

But the Monterrey-based company came unstuck following its purchase of Rinker, the Australian building-materials supplier, for $15.3bn – an acquisition it financed with short-term loans and that came on the cusp of the US housing crash.

Source: Financial Times, 22.10.2012

Filed under: Colombia, Exchanges, Mexico, News, , , , , , , ,

Brazil: Foreign investors exempetion from paying 2% IOF tax on equity trades BM&FBOVESPA

The Brazilian government has repealed a tax placed on foreign investors trading equities, in a move which domestic exchange BM&F Bovespa believes is sure to stimulate trading activity in the country.

The IOF tax, which stood at 2% for equities since its launch in October 2009, has now been eliminated. The tax was also removed for debt instruments that have a tenor of four years or longer.

The levy was introduced by the Brazilian government in order to help it control the rapid appreciation of the Brazilian real. It was initially set at 2% for all initial investments made by foreigners in fixed income and derivatives transactions. The tax was increased to 6% for fixed income transactions in October 2010.

“We are not easing our currency policy. If there is any risk of the currency appreciating, we will increase the IOF on derivatives,” Brazilian finance minister Guido Mantega is reported to have said at a press conference today.

The announcement by the Brazilian government had an instant positive impact on equities prices in the country, with shares in BM&F Bovespa surging by almost 7% today.

“By reducing the IOF to 0% on foreign investments for equities, the government has sent a clear message about the importance of the capital markets as a way to support local companies,” Sergio Gullo, chief representative for BM&F Bovespa in EMEA, told “The removal of the tax will encourage more foreign investment to our market.”

The removal of the IOF tax may also help to bring more high-frequency trading (HFT) to Brazil, the increase of which BM&F Bovespa has identified as a key aspect of its growth strategy. Gullo says that the exchange believes HFT will reach 20% of overall equity trading volumes in the next few years.

As part of its plans to attract HFT, BM&F Bovespa has partnered with US exchange operator CME Group to develop Puma, a new US$200 million multi-asst class trading platform. The new platform will be able to process 200 million messages per day and offer an average round-trip latency of 1.1 milliseconds.

“The removal of the tax has very little downside and it appears that the Brazilian government is not concerned about the effect of equity trading on currency appreciation,” said Danielle Tierney, analyst at consultancy Aite Group. “It will be more of a positive for HFT firms than traditional market participants. The exchange should have no trouble in reaching its 20% HFT target.” Source: Trade News, 01.12.2011

São Paulo, December 01, 2011 – BM&FBOVESPA considers the measure that the Brazilian government announced today as bang on target, demonstrating an understanding that the Brazilian market is going through a moment of great opportunities and also constitutes a fundamental instrument for companies’ growth and the development of the country.

Between 2004 and 2011, Brazilian companies held 232 public share offerings, of which 138 were IPOs. These operations resulted in a total of BRL 370.7 billion raised, which went towards these companies’ growth projects, contributing towards a significant increase in job creation and incomes in Brazil. It is important to bear in mind that around 70% of this volume came from foreign investors.

Brazil’s capital market has a great capacity to attract foreign investment, due to its credibility built on strong regulatory foundations and on best practices in corporate governance.

In this manner, BM&FBOVESPA believes that with the government measure to exempt the IOF tax on operations by foreign investors, there will be an even more favorable picture for the more than 40 companies that are waiting for the right moment for their share offerings to raise the resources they need for their investments and growth in 2012.

Source: BM&FBOVESPA, 2.12.2011

Filed under: BM&FBOVESPA, Brazil, Exchanges, Latin America, News, , , , , , , ,

China & Brazil: Shanghai Stock Exchange and BMF&BOVESPA launch all-round cooperation

The 2nd China-Brazil Capital Markets Forum, jointly sponsored by the Shanghai Stock Exchange (SSE) and BM&F BOVESPA, was held on 27 October in Shanghai. SSE President Zhang Yujun said that the SSE would cement all-round cooperation in the capital markets of both sides with BM&F BOVESPA.

Marcos Caramuru, Ambassador of the Consulate General of Brazil in Shanghai, and Edemir Pinto, CEO of BM&F BOVESPA attended the forum presided over by Zhou Qinye, SSE Chief Accountant.

This February, Zhang Yujun, SSE Vice President Xu Ming and their entourage participated in the 1st China-Brazil Capital Markets Forum held in Brazil and signed a memorandum on closer cooperation with BM&F BOVESPA. Both sides fixed upon negotiation to hold the 2nd China-Brazil Capital Markets Forum in China in late October, 2011.

At the forum held in Shanghai, both sides compared notes on the intensification of cooperation and exchanges in China-Brazil Capital Markets and the in-depth development of the exchanges in the two countries under the new backdrop. Besides, special sub-forums were held to respectively discuss the opportunities for and internationalization of enterprises in emerging markets, the challenges and opportunities of emerging markets for investment in multinational capital markets and the practices and experience in the investor education and protection.

According to the cooperation memorandum signed previously, both sides reached an intent of cooperating in information, exchange, product development, trading platform construction, mutual personnel dispatch. Besides, both sides had common views on the periodical visit mechanism of senior managers as well as the exchanges in bond, fund, information, technology, investor education, academic science and personnel dispatch.

Zhang Yujun said at the forum that with the rapid growth of Chinese economy in recent years, the two countries had seen a good trend of economic cooperation. In the South America, China had become the biggest source of capital flowed as FDI into Brazil. All this would require the domestic financial industry, especially all the participants in the capital market, to provide better financial services and supporting services for further opening-up of the Chinese economy. The cooperation between the SSE and BM&F BOVESPA should be cemented in response to the new trends of the economic growth and capital market development in the two countries.

Finally, Zhang said that after the 1st China-Brazil Capital Markets Forum, more and more exchanges in the domestic capital market strengthened the cooperation with all the participants in the Brazilian capital market. For instance, a participant in the Brazilian capital market directly invested in the IPO of CITIC Securities in Hongkong. In the future, more domestic securities companies and fund management companies will provide financial services for Chinese enterprises’ investment in foreign capital markets.

Source: MondoVision, 31.10.2011

Filed under: Brazil, China, Data Management, Exchanges, News, Trading Technology, , , , , , , , , , , , , , , , , ,

Brazil: BM&FBOVESPA – News October 2011 – Nr.21

BRIC exchanges announce alliance

The exchanges of the BRIC emerging markets bloc announced a joint initiative on October 12, during the 51st AGM of the World Federation of Exchanges (WFE) in Johannesburg, to offer investors access to their dynamic economies. Initially the exchanges – which accounted for over 18% of all exchange-listed derivative contracts traded by volume worldwide as of June this year – will cross-list benchmark equity index derivatives on the boards of other alliance members. Following this, the alliance will develop innovative products to track the BRIC exchanges.

The seven exchanges are:

  • BM&FBOVESPA – Brazil
  • MICEX – Russia
  • RTS – Russia
  • Hong Kong Exchanges and Clearing Limited (HKEx) – China
  • Johannesburg Stock Exchange (JSE) – South Africa
  • The National Stock Exchange of India (NSE) – India
  • BSE Ltd (formerly known as Bombay Stock Exchange) – India

These seven exchanges represent a combined listed market capitalization of USD9.02 trillion, equitymarket trading value/month of USD422 billion and 9,481 companies listed.

BM&FBOVESPA new trading hours

In view of the start of daylight saving time on October 16, 2011, since October 17, 2011, the new trading hours (Brasília Time) for the BM&FBOVESPA markets – BOVESPA and BM&F segments – will be as follows:

Regular session: 11:00 a.m. – 6:00 p.m.

– After-Market: 6:30 p.m. – 7:30 p.m. (pre-opening phase to trading phase);

– Blocking / Exercise on the stock options market
Days prior to expiration: 11:00 a.m. – 5:00 p.m. (exercise of holder position).
Expiration date: 11:00a.m. – 12:30 p.m. – trading of the expired series to the offset of the position, that is, the sale for the holder of the position and purchase for blocking for the writer of the position / 12:30 p.m. – 2:00 p.m.: exercise of the holder position;

– Blocking / Exercise on the Index Options Market:
Days prior to expiration: 11:00 a.m. – 2:00 p.m. (exercise of holder position).
Expiration date: 11:00 a.m. – 2:00 p.m. – trading of the expired series to the offset of the position, that is sale for the holder of the position and purchase for blocking for the writer of the position / After 6:00 p.m. – automatic exercise of the expired series which fit the following situations: call option (settlement index higher than the exercise price; and put option (settlement index lower than the exercise price).

– Over-the-Counter Market: 11:00 a.m. – 6:00 p.m.

> Complete information of the new trading hours (Circular Letters 009-2011-DO-Ofício Circular)

The trading hours for the BOVESPA and BM&F segments are available at this link

Market Makers for Options on the Stock of Banco Bradesco, Gerdau and Banco do Brasil

BM&FBOVESPA announced on August 3rd the start of the bidding process to select up to three market makers for options on stock of Banco Bradesco S.A. (BBDC4), Gerdau S.A. (GGBR4) and Banco do Brasil S.A. (BBAS3). This is the third stage of the Competitive Bidding Process to select market makers in equity options and BOVESPA Index (Ibovespa) options, developed by BM&FBOVESPA. The institutions (including nonresident) that wish to participate have until November 29, 2011 to deliver proposals and the winners will be announced on December 14, 2011.

> More info

Market Makers for Options on Ibovespa and on Stocks of BM&FBOVESPA and Usiminas

BM&FBOVESPA announced on October 11 the winning institutions in the second selection process for market makers for options on stocks and on the BOVESPA Index (Ibovespa). The market maker obligation shall last twelve (12) months as of December 12, 2011. Banco Citigroup Global Markets Limited, Banco Itaú BBA S.A. and Timber Hill LLC shall be market makers for options on the BOVESPA Index (IBOV), complying with a maximum volatility spread of half a percentage point (0.5%). The institutions selected for options on stocks in BM&FBOVESPA S.A. (BVMF3) were Citadel Securities LLC, Citigroup Global Markets Limited and Morgan Stanley Uruguay Ltda, which shall be market makers complying with a maximum volatility spread of four percent (4%). Meanwhile, the institutions selected for options on stocks in Usinas Siderúrgicas de Minas Gerais S.A. (USIM5) were Banco BTG Pactual S.A. and Morgan Stanley Uruguay Ltda, which shall be market makers complying with a maximum volatility spread of twenty percent (20%).

> More info

Options on OGX Petróleo and Itaú Unibanco rise with Market Maker activity

The trading volume for options on the stocks of OGX Petróleo and Itaú Unibanco rose significantly in September, strongly influenced by the fact that they have had Market Makers since September 9. The Exchange launched the Market Maker program for stocks this year in order to encourage trading in options and increase their liquidity, as well as to stimulate longer expiries on these contracts. Options on the stocks of OGX Petróleo and Itaú Unibanco now have three Market Makers.

Comparing the average daily volume in September to that of January to August, there were the following increases: OGX Petróleo ON 51.9% (BRL 13.7 million against BRL 20.8 million) and Itaú Unibanco PN 205.6% (BRL 1.7 million against BRL 5.1 million).

ETF financial volume more than doubles in the past two months

BM&FBOVESPA Exchange Traded Funds (ETFs) reached BRL 1.4 billion financial volume in August and September, at 78,809 and 75,740 trades respectively. This is more than double the BRL 668 million financial volume and 31,997 trades in July.

Common Shares in Desenvix Energias Renováveis start trading on BOVESPA MAIS

The shares of electricity company Desenvix Energias Renováveis S.A. begin to be traded on October 3 on the BOVESPA MAIS segment of the BM&FBOVESPA Organized OTC Market, under the DVIX3M ticker symbol.

USD11 billion in public offerings and follow-ons in 2011

In the year to October, 15, BM&FBOVESPA registered USD11 billion in public offerings and follow-ons. There were eleven Initial Public Offerings (IPOs) in 2011: AREZZO&CO (ARZZ3), SIERRA BRASIL (SSBR3), AUTOMETAL (AUTM3), QGEP PART (QGEP3), IMC HOLDING (IMCH3), TIME FOR FUN (SHOW3), MAGAZINE LUIZA (MGLU3), BR PHARMA (BPHA3), QUALICORP (QUAL3), TECHNOS (TECN3) and ABRIL EDUCAÇÃO (ABRE11).

BM&FBOVESPA on Twitter

BM&FBOVESPA launched its Twitter account in English last week. Please access this link


 The World Cup of ETFs and Indexing Latin America

BM&FBOVESPA is lending its support to the World Research Group’s “World Cup of ETFs and Indexing Latin America.” The event aims at providing attendees with the best practices for ETF use, as well as a comprehensive analysis of market structure, regulations and current and future opportunities. The expected audience includes pension funds, hedge fund managers and investors, investment advisors, financial consultants, and other market participants. A BM&FBOVESPA representative will talk about the Exchange’s ETF products.

Location: São Paulo (TBC)
Date: October 17-18, 2011.
> Full Agenda and Registration

2nd FX Growth Markets Series: Brazil – Profit & Loss

BM&FBOVESPA will join the Profit & Loss FX Growth Markets conference on October 20, 2011 at the Tivoli Hotel in São Paulo. Profit & Loss has been operating its highly successful series of Forex Network and FX Growth Markets conferences for more than 10 years, with regular annual events held in London, New York, Chicago, Singapore, Brazil, Mexico, Colombia, Chile, Shanghai and Toronto, and comes to Brazil for the second time. A BM&FBOVESPA representative will talk at the event.

Location: Tivoli Hotel São Paulo, São Paulo, Brazil
Date: October 20, 2011.
> Full Agenda

2nd Brazil–China Capital Markets Forum

BM&FBOVESPA and the Shanghai Stock Exchange are coordinating the Second Brazil–China Capital Markets Forum. This event follows the First Brazil–China Capital Markets Forum, which occurred in February in São Paulo, Brazil. At the event, the Shanghai Stock Exchange shall bring 300 to 500 Chinese asset and insurance managers and representatives of listed companies.

Location: Xijiao State Guest House Shanghai, China
Date: October 27, 2011.

Volumes and trades by Direct Market Access (DMA)

BM&F Segment
In September, BM&F* market segment transactions carried out through order routing via Direct Market Access (DMA) registered 35,144,357 contracts traded and 4,311,865 trades. In August, the volume reached 41,417,494 contracts traded and 4,431,750 trades.

The volumes registered by each access modality in the BM&F segment were as follows:

  • Traditional DMA – 12,583,334 contracts traded, in 1,366,264 trades, in comparison to 17,540,231 contracts and 1,306,241 trades in August;
  • Via DMA provider (including orders routed via the Globex System) – 13,976,949 contracts traded, in 374,992 trades, compared to 14,088,756 contracts and 435,281 trades in August;
  • DMA via direct connection – 2,636 contracts traded in 447 trades, against 4,210 contracts and 830 trades in August;
  • DMA via co-location – 8,581,438 contracts traded, in 2,570,162 trades, compared to 9,784,297 contracts and 2,689,398 trades in August.

In September, transactions carried out by foreign investors presented by CME to BVMF (who use the Globex-GTS order routing system or access BVMF markets via co-location) totaled 4,685,186 contracts traded, in 1,164,510 trades, compared to 5,308,308 contracts and 1,235,349 trades in August.

In September, order routing via DMA in the BOVESPA* segment totaled BRL 111.41 billion and 14,298,483 trades, from BRL 138.52 billion and 17,021,408 trades the previous month.

Trading volumes per type of DMA in the BOVESPA segment:

  • Traditional DMA – Volume of BRL 95.77 billion and 11,763,618 trades from BRL 120.45 billion and 14,098,638 in August;
  • DMA via co-location – Volume of BRL 14.29 billion and 2,357,270 trades from BRL 16.69 billion and 2,755,498 in August;
  • DMA via provider – Volume of BRL 1.34 billion and 177,044 trades from BRL 1.37 billion and 167,272 in August.

* Direct access to the BM&FBOVESPA market segments is carried out through DMA models 1, 2, 3 and 4. In model 1 or traditional DMA, the client accesses the GTS or Mega Bolsa through technological intermediation of a brokerage house. In model 2 or via DMA provider, the client does not use the technological intermediation of a brokerage house, but rather connects to the system through an authorized access provider. DMA via order routing with CME Globex is also a form of DMA model 2. In model 3, the client connects to the system through a direct connection. In model 4 or via co-location, the client installs its own computer within the Exchange’s facilities.


The volumes registered by access modality include both buy and sell sides of a trade.

The volumes by access modality for both the BM&F and the BOVESPA market segments have been reported in a consolidated manner in the BM&FBOVESPA statements since May 2009.


BM&F Segment September 2011

Derivatives markets in the BM&F segment (including financial and commodities derivatives) totaled 59,365,524 contracts and BRL 4.35 trillion in volume in September, compared to 78,606,873 contracts and BRL 5.23 trillion in August. The daily average of contracts traded in the derivatives markets in September was 2,826,930, in contrast to 3,417,690 in August. Open interest contracts ended the last trading day of September with 36,620,797 positions, compared to 37,821,302 in August.

BOVESPA Segment September 2011

In September 2011, the equity markets (BOVESPA segment) financial volume totaled BRL 131.437 billion, in 13,551,487 trades, with daily averages of BRL 6.25 billion and 645,309 trades. In August, financial volume totaled BRL 177.906 billion, the total number of trades 16,234,673, and the daily averages BRL 7.73 billion and 705,855 trades respectively.

Source: BM&FBOVESPA, 18.10.2011

Filed under: BM&FBOVESPA, Brazil, China, Events, Exchanges, Hong Kong, India, Risk Management, , , , , , , , , , , , , , , , , , , , , , , , , ,

Brazil – Current Scenario Keeps the Market on Tenterhooks– Monthly Allocation- May 2011

Internationally, Advances Should Continue Slowly but Surely
We foresee a relatively neutral international scenario for May, but the outlook for the global economy seems unlikely to improve in the upcoming weeks, and several issues might continue to raise investors´ concern. In the US, the government’s debt ceiling issue is unlikely to cause any market disruptions, but it could generate some nervousness. Also, although economic activity continues to grow, the increase of the jobless claims in the last two months could cast some doubts on consumption’s short term outlook. Meanwhile, in the Euro Zone, Spain has continued to manage to sell debt as scheduled, and talks between Portugal and the EU on the financial assistance package have progressed. Nevertheless, the fact that Portugal will hold general elections in June and Finland’s population have shown growing resistance to EU’s current assistance framework indicates that the road to the package is likely to be bumpy, generating some noise and fear.


1Q Results Season to Drive the Market
In terms of the domestic scenario in Brazil, an uncertainty mood is likely to continue concerning the Federal Government fight to curb inflation. The government has continued to try to fight inflation without jeopardizing economic growth, which generates many doubts on the economic outlook for 2011 and 2012. On the other hand, the Central Bank has, at least, acknowledged that the monetary tightening cycle will have to be extended, which is encouraging. In all, the local macro scenario tends to generate less anxiety, because market players will live for some time with the prolonged gradual tightening of the monetary policy, the slow appreciation of the Real, some fiscal tightening, and remaining doubts on whether the government’s strategy will work.

The first half of May will concentrate the majority of the 1Q season reports. Given the aforementioned scenario, where nothing impacting is expected, the market should be driven this month by corporate results and news. With most of the 1Q macroeconomic figures already out, we do not believe in unexpected results except for specific exceptions.

Having this calmer outlook for the local economy in mind and with the negative bias from the still unabated inflation, we continue believing in a volatile stock market for May with a slightly negative trend. Given this, we have changed very little our previous portfolio for May. We included Raia and Telesp, with 5% weight each. We also withdrew HRT from the list, due to the potential overhang with the end of the lock up agreement between the pre IPO shareholders. With these changes, we increased the total number of companies by one so we re-balanced the lower weights to 5%, from 6%.

Source:BANIF, 02.05.2011

Filed under: Banking, Brazil, Latin America, News, Risk Management, Services, , , , , , , , ,

Brazil: BVMF (BM&FBOVESPA) News February 2011, Nr 23

Complete Report Nr 23, February

Public hearing for the competitive bidding to select Equity Option Market Makers
Comments and suggestions for stage 1 of the program to become equity option market makers should be sent to BM&FBOVESPA by February 18, 2011.

BM&FBOVESPA launches reference interest rates for the fixed-income market
BM&FBOVESPA began daily publication on February 1st of two new interest rate indicators, the 3 and 6 month Reference Interest Rates, which it seeks to make into reference rates for the fixed-income market.

BM&FBOVESPA launches cash-settled soybean contracts
Trading in the new cash-settled soybean futures contract started on January 27th. The underlying commodity is export type soybeans sold at the Paranaguá port, Paraná state.

Opening of the bidding process for the selection of a manager for ISE and IGCT ETFs
All entities interested in participating in the Bidding Process must submit their documentation to BM&FBOVESPA by no later than March 2, 2011.

BM&FBOVESPA breaks co-location trading and financial volume records
BM&FBOVESPA obtained five consecutive records of co-location trading (Bovespa Segment – equities) in January.

BM&FBOVESPA reaches almost USD 2 billion of public offering and follow-ons in 2011
By February, the volume from this activity on BM&FBOVESPA reached almost USD 2 billion. There were four IPOs by February 9th: AREZZO &CO, SIERRA BRASIL, AUTOMETAL and QGEP PART.

International Investors and Media professionals receive specific attention at BVMF
The BM&FBOVESPA website presents two new sections in English dedicated to international investors and media professionals:  INTERNATIONAL INVESTORS and MEDIA ROOM.

Volumes and trades by Direct Market Access (DMA) BM&F Segment (Derivatives)
In January, BM&F* market segment transactions carried out through order routing via DMA registered 16,404,063 contracts traded and 1,570,297 trades.

Volumes and trades by Direct Market Access (DMA) BOVESPA Segment (Equities)
In January, BOVESPA* market segment transactions carried out through DMA via co-location registered a record financial volume of BRL 2,512,390,000.00 and a record 385,960 trades.

MARKET RESULTS BM&F Segment 2010 (derivatives)
In January, derivatives markets in the BM&F segment (including financial and commodities derivatives) totaled 53,040,432 contracts and BRL 3.97 trillion in volume.

MARKET RESULTS BOVESPA Segment 2010 (equities)
In January 2011, equity markets (Bovespa segment) traded BRL 129.49 billion, in 9,304,931 trades, with daily averages of BRL 6.47 billion and 9,304,931 trades

Source:BVMF (BF&BOVESPA), 15.02.2011

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China: Governor of the Shanghai Stock Exchange (SSE) Geng corrects three Misunderstandings on International Board

Geng Liang, member of the CPPCC National Committee and Governor of the Shanghai Stock Exchange (SSE), clarified ambiguous and incorrect assumptions in development of International Board in Beijing yesterday.

According to Geng, the introduction of International Board would benefit both the development of domestic capital market and the building of Shanghai into an international financial hub and would by no means reduce itself into a global ATM machine as some concerned.

Three Major Positive Effects of Int’l Board

“The decision of listing eligible overseas companies on domestic market, or introducing International Board, is made based on the consensuses reached through the Sino-US strategic economic dialogues and Sino-UK economic and trade dialogues. For China’s capital market, the launch of International Board will bring about benefits in three aspects,” said Geng. First of all, the launch of International Board, a milestone in China’s opening-up of its capital market, offers domestic investors a new channel to purchase shares of large overseas companies with RMB, which is by all means a progress.

Relevant insiders also hold that the opening of International Board is especially conducive to the investment in overseas enterprises by investors who are inexperienced in overseas investment and unfamiliar with foreign law and accounting systems.

Besides, the development of International Board will exert positive influence on the construction of blue-chip market, thus promoting the growth of China’s capital market. “The ultimate goal of the SSE is to build a blue-chip market, which includes high-quality Chinese and foreign listed companies,” added Geng.

Finally, International Board means a lot to building Shanghai into a global financial center. “The listing of overseas companies on domestic market will help pool human resources, capital and institutions to Shanghai,” noted Geng.

No Possibility for “Int’l ATM machine”

As to the concern about misusing International Board as “a global ATM machine”, Geng explained that under the arrangement that free exchange is forbidden under the RMB capital account, the A shares on the future International Board can’t be exchanged freely with the shares issued overseas. Thus, there is no possibility for “a global ATM machine”. Furthermore, “the large international companies, who apply for going listed on the SSE, have already got listed on overseas stock exchanges. Their listing on Chinese market is actually a behavior of refinancing. According to internationally accepted practices, the prices for refinancing generally shouldn’t exceed those on local secondary market.” Therefore, it is not qualified to be “a withdrawing behavior” in terms of scale.

Geng also stated that the launch of International Board would not impact Hong Kong’s position as an international financial center. “The support to Hong Kong market instead of affecting its construction of international financial hub by the return of H shares to A shares is a case in point. During the 20 years’ development of China’s capital market, 60 domestic enterprises went listed in Hong Kong, which vividly proved that the development of domestic capital market boosted Hong Kong market and exchange.”

Substantial Benefits of Int’l Board

Insiders hold that the benefits of initiating International Board are substantial. Apart from those mentioned by Geng, there are at least five more major benefits.

First, the new board will relieve the pressure from foreign exchange reserve, which accords with the development transition of national economy from capital attraction to technical, managerial and human resources introduction. Second, the new board will attract overseas natural resources and energy enterprises to get listed in China, thus helping break their capital barrier towards China’s capital by counteracting the increase in international commodity prices with equity income. Third, the new board provides a channel for Chinese investors to share the income from business conducted by multinational companies in China while changing the situation that multinational companies can only offer job opportunities to Chinese. Fourth, the corporate governance of domestic listed companies will be improved thanks to the model effect of overseas companies listed in China. Last but not least, the new board will help multinational companies integrate themselves with China’ economy to make greater contribution to the development of China’s economy.

Source: MondoVisione, 11.03.2010

Filed under: China, Exchanges, News, , , , , , ,

The bumpy road to the international A-share trading board

While government officials and listing candidates are enthusiastic about the launch of the planned trading board, there are several hurdles that remain unresolved.

Designed to allow overseas companies to list shares on China’s major stock exchange, Shanghai’s highly anticipated international trading board is being heralded as a way to provide a powerful lift to the country’s equity markets in the year of the tiger, but it is turning into a paper tiger, experts say.

The planned board, which has been under discussion for years without tangible progress, was brought into the spotlight again last summer after government officials revealed the Chinese authorities’ determination to launch it. However, key issues such as share sale limits, the use of funds raised through share sales, accounting standards, and listing requirements remain unresolved.

Companies aiming for the international board first need to comply with Chinese accounting standards. However, it is very unrealistic to require companies with assets all over the world to comply with Chinese book-keeping rules and auditing standards, industry experts say.

Every year, the translation of an audit report based on general international standards into the Chinese accounting format could cost a typical company from $5 million to more than $10 million extra — an expense that all cost-conscious financial executives would want to avoid, experts say.

Another issue is that the nation’s corporate and securities laws currently only apply to domestic companies, and Chinese lawmakers are not ready to restructure the legal framework and make it more adaptable for foreign companies that want to offer A-shares.

The preparation of HSBC’s highly anticipated Shanghai share sale is suspended for “at least six months”, sources familiar with the deal said last week, citing technical problems in the listing process.

Also, with China running a top-down, command-and-control economy, the current review and approval procedure for the country’s equity capital market is an obstacle for foreign companies, strategists argue.

“Listings in China receive too much intervention by the government,” said Lou Gang, a China strategist at Morgan Stanley. “Launching an international board would test the current system for launching IPOs (initial public offerings),” he said.

Even so, apart from HSBC, other global players such as Standard Chartered Bank and the New York Stock Exchange have also expressed their enthusiasm for listing on the international trading board.

While overseas issuers are concerned about China’s listing regulations, Chinese investors and regulators are worried the outsiders will soak up too much liquidity from the country’s equity market.

The cautious sentiment among investors is evident in online forums in China, where the planned international trading board is hotly debated. Some say the foreign companies will take advantage of the Shanghai market’s high offering prices and valuations and make use of the stock exchange as an automatic teller machine.

Others warn that HSBC’s listing will absorb funds worth as much as 20 Nanpu Bridges in Shanghai — one of the longest highway bridges in the world, with a total construction cost reaching Rmb820 million ($120 million).

“HSBC will take 20 Nanpu Bridges away from us,” one forum participant wrote. “Don’t let the irrigation fertilise others’ fields,” wrote another.

Analysts suggest the authorities should require foreign companies to re-invest the proceeds from their share sales exclusively in China or give approval only to red-chip companies, which are registered overseas but with most of their assets and operations on the Chinese mainland.

Generally, regulators and market observers concur that the introduction of foreign company listings is a must and will help improve the country’s equity markets and accelerate the process of making the Chinese yuan freely convertible.

“Foreign company listings will set a good example for domestic companies in China,” said Wei Sun, Morgan Stanley’s China CEO.

Tu Guangshao, Shanghai’s vice mayor and a former vice-chairman of the China Securities Regulatory Commission, said at the Asian Financial Forum in Hong Kong last month that the municipal government strives to build the city into an international financial centre and that the creation of the planned board is in progress.

The international trading board was first brought to the table by Unilever Company in 2000 when the US retailer of personal care products expressed its interest in an A-share listing in a bid to strengthen its network and brand-name penetration in China. Discussion about the board has been under way ever since, but a concrete plan has yet to be made.

Commerce minister Chen Deming said at an investment conference in Xiamen last September that China will certainly allow listings by qualified foreign invested companies on the mainland stock exchange.

PricewaterhouseCoopers predicted last month that the board will start trading in the second half of this year. The new board may help the Shanghai Stock Exchange (SSE) to raise up to Rmb300 billion ($44 billion) through IPOs this year, overtaking its Hong Kong counterpart, which is forecast to raise HK$300 billion ($39 billion), the international accounting firm said.

Source:,19.02.2010 by Lillian Liu

Filed under: China, Exchanges, News, , , , , , ,

Brazil: BM&FBOVESPA Exchange news and events February 2010

BM&FBOVESPA launches foreign exchange non-deliverable forward contract

BM&FBOVESPA has authorized, as of January 18, the registration of dollar, euro, yen, and cross-rate non-deliverable forward contracts in its OTC market.

Initially, only foreign exchange transactions established by the Brazilian Central Bank can be registered. As of March 1, BM&FBOVESPA will also authorize the registration of transactions with exchange rates calculated by the following information sources: U.S. Dollar/Euro parity exchange rate calculated and published by the European Central Bank; U.S Dollar/Euro exchange rate fixed by WMR/Reuters; Japanese Yen/U.S. Dollar parity exchange rate calculated and published by the Central Bank of Japan; and Japanese Yen/U.S. Dollar exchange rate fixed by WMR/Reuters.

Click here for further details regarding the contract.

BM&FBOVESPA appoints executive for its London operations

The Exchange announces the appointment of Cathryn Lyall as Director of BM&FBOVESPA (UK) Ltd, a wholly-owned subsidiary of BM&FBOVESPA. Ms. Lyall will be responsible for the set up and expansion of the new BM&FBOVESPA European office located in London, including all product and sales related activities in EMEA.

Ms. Lyall will also be responsible for establishing regulatory relationships, education and training programs, speaking opportunities, and developing marketing, and business development related activities targeted at potential customers in the region. She will report to Joao Lauro Amaral, head of International Business for BM&FBOVESPA.

Exchange hosts event to seal partnership between Brazil and the International Accounting Standards Board (IASB) on convergence to IFRS

BM&FBOVESPA hosted, on 28 January 2010, the signing of a Memorandum of Understanding between the International Accounting Standards Board (IASB), the Brazilian Federal Council of Accounting (CFC) and, the Brazilian Accounting Pronouncements Committee (CPC).

The partnership is an important step towards the insertion of Brazil in the international forum on the establishment and adoption of a set of accounting standards known as the IFRS (International Financial Reporting Standards).

Since only a handful of countries have signed memorandums with the IASB, such partnership demonstrates Brazil’s commitment towards global regulatory issues. The agreement’s objective is to expand the convergence to IFRS norms in Brazil and to also guarantee a greater participation of Brazilian companies in regulatory discussions.

Exchange registers record fourth quarter trading

The average daily financial volume traded at the Brazilian Securities, Commodities and Futures Exchange equity markets reached a record BRL 6.840 billion during the fourth quarter of 2009. The amount surpasses in 3.34% the previous record, of BRL 6.618 billion, set during the fourth quarter of 2007. It is also 31.19% greater than the average daily volume traded in the third quarter of 2009, of BRL 5.214 billion.

Due to this historic record, the average daily volume registered during the second semester of 2009 reached BRL 6.001 billion; 32% superior to the average daily volume of BRL 4.560 billion, registered in the first six months of last year. During the fourth quarter, foreign investor participation in the traded volume was 31.7%, followed by individual investors (29.1%), institutional investors (27.1%), financial institutions (9.8%), and others (0.06%).

BM&FBOVESPA is the third most important market in terms of IPO operations in 2009

The Brazilian Exchange was the backstage for US$ 12.5 billion in capital raised through IPOs operations in 2009, ranking it in 3rd place as the most important IPO market in the world, only behind the Hong Kong and Shanghai Exchanges.

The total capital raised by shares issues accounted for US$ 41.7 billion in 2009, placing BM&FBOVESPA among the top 10 global markets, according to the World Federation of Exchanges.

Exchange ranks as the second largest equity options market and the sixth largest derivatives market in the world

According to the Futures Industry Association, BM&FBOVESPA has the second largest equity options market in the world. It registered a total of 369 million contracts traded from January to September 2009. The ranking is calculated based on the number of single stock options contracts and/or cleared.

Also, according to the same institution, BM&FBOVESPA was the 6th largest exchange in the world in terms of number of futures and options contracts traded from January to September 2009. That period registered a total trading volume of 649,203,768 contracts, which represents an increase of 12.6% over the same period in 2008.

Exchange sets DMA trading records

On 28 January 2010, the Exchange set a new DMA trading record (derivatives segment), reaching 836,153 contracts traded. The previous record was 773,396 contracts traded (on 21/01/2010). DMA trading via order routing with CME Group also set a record, on the same date, reaching 52,053 trades. The previous record of 51,422 was set on 21/01/2010.

In December, Direct Market Access (DMA) trading of the derivatives market segment registered a total of 8,238,292 contracts traded via DMA*, with 998,834 trades carried out through the GTS trading platform. In November, the total was 8,350,565 contracts traded in 1,103,437 trades. The volumes registered by access modality in December in comparison to the previous month are as follows:

Traditional DMA – 3,546,606 contracts traded, in 385,040 trades, in comparison to 3,838,053 contracts traded and 444,987 trades;

DMA via order routing with CME Globex (CME Group’s electronic trading platform) – 2,144,247 contracts traded, in 506,991 trades, in comparison to 2,321,877 contracts and 557,088 trades.

Via DMA Provider – 2,277,446 contracts traded, in 57,677 trades, in comparison to 1,900,815 contracts traded and 43,486 trades;

DMA via co – location – 269,993 contracts traded, in 49,126 trades, in comparison to 289,820 contracts traded, in 57,876 trades.

BM&FBOVESPA 2009 market performance

BM&F segments
Derivatives markets in the BM&F segment (including financial and agricultural derivatives) totaled 373.41 million contracts and a financial volume of BRL 26.78 trillion in 2009, compared to 391.62 million contracts and BRL 28.01 trillion in financial volume in 2008. The daily average of contracts, in 2009, was 1,517,941, as opposed to 1,572,783 in 2008. Mini contracts traded reached 12.95 million in 2009, in contrast 10.08 million in 2008.

Bovespa Segments
The equity markets (Bovespa segment) reached a total volume of BRL 1.3 trillion in 2009, compared to BRL 1.37 trillion in 2008. The average daily financial volume was BRL 5.28 billion, in contrast to BRL 5.52 billion in the previous year. During 2009, 81.75 million trades were carried out, as opposed to 61.02 million in 2008. In 2009, the daily average of trades reached, 332,349, surpassing the average of 245,071 trades in 2008.

Exchange Holidays for 2010

For the list of Exchange Holidays for 2010, click here. There will be no trading activities in either of the equities market (Mega Bolsa), or the corporate fixed-income securities markets (Bovespa Fix and Soma Fix), or the derivatives market (GTS), and BM&FBOVESPA will be closed for business on these holidays.

Source: BM&FBOVESPA, 02.02.2010

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China: SZSE – ChiNext Creates 13 Billionaires on Paper on First Trading Day

China’s GEM market has given birth to more than a dozen billionaires due to extraordinary enthusiasm of investors.

Strong gains on the opening day of China’s Growth Enterprise Market, the Nasdaq-style board for high-tech startups, have created 13 paper billionaires, Caijing reported, citing calculations based on their declared holdings in the IPO companies.

The biggest individual shareholder in Lepu Medical Technology (Beijing) Co Ltd. (SZSE 300003), general manager Pu Zhongjie, saw the value of his 14.9 percent stake soar to 3.8 billion yuan (US$556 million). The stock rose nearly 119 percent to 63.4 yuan.

The surge in stocks also saw the value of 116 investors’ holdings rise to more than 100 million yuan, Caijing has calculated. The total includes the 13 billionaires.

The other big gainers on the first day included Wang Zhongjun, chairman of Huayi Brothers Media Corp. (SZSE 300027), whose holding of 26.1 percent was estimated to be worth 3.1 billion yuan at the close of trading. The stock rose nearly 148 percent to 70.8 yuan.

Chairman Wang Ning and general manager Li Li of Beijing Ultrapower Software Co Ltd. (SZSE 300002) saw the value of their holdings rise to 1.8 billion yuan each after the company’s stock rose 77.4 percent to 102.9 yuan. Wang and Li each own 13.9 percent of the company.

The so-called “ChiNext” market, the brand GEM is marketed under, began trading at 9:30 am on Friday. Gains by the first 28 companies to list ranged from 76 to 210 percent at the close of the first day.

However, due to China’s volatile stock market and a lock-up period ranging from one year to three years, the wealth of today’s millionaires could shrink substantially. It is very hard to predict how many of them still possess seven-digit wealth in a few years.

Some Brokers Gain Big as ChiNext Issues Soar
Several brokerage firms appear to have made substantial profits from investments in companies listed on ChiNext, the new growth enterprise board that opened last Friday.
According to the ChiNext companies’ shareholders list, some brokerages invested in the firms before the initial public offerings. The China Securities Regulatory Commission approved applications by 15 brokers to invest directly in the companies ahead of the IPOs. On Friday, the companies saw their shares skyrocket, with the 28 stocks registering gains of 75.84 to 209.73 percent.

Click here for pre-trading news., 02.11.2009 by Shen Hu

Filed under: Asia, China, Exchanges, News, , , , , , , , , ,

Shanghai Stock Exchang International listing Board on track

Positive signals for an international board on the Shanghai Stock Exchange point to a nearing launch. But major obstacles remain.

A growing din within financial circles suggests China’s proposed international board for foreign company stock trading is on the runway and approaching takeoff.

On September 8, Commerce Minister Chen Deming said at an investment conference in Xiamen that China would indeed allow listings by qualified foreign invested companies on mainland exchanges.

The same day, CITIC Securities International Chairman Ted Tokuchi said at a Caijing conference that if the Chinese stock market remains stable, a first draft for board listing rules could be released after China’s national holidays in early October. The news drove the A-share Shanghai Composite Index up 1.7 percent to close the day at 2930 points.

One or two foreign companies are expected to list through the board on the Shanghai exchange early next year, announced Fang Xinghai, director of the municipal Shanghai Financial Office, while describing Shanghai’s effort to build a new trading platform during a London visit in mid-September.

In another positive signal, Caijing learned that the China Securities Regulatory Commission (CSRC) has set up a working group under CSRC Vice Chairman Yao Gang that’s specifically dedicated to the task of building an international board.

At the Shanghai exchange, General Manager Zhang Yujun is in charge of a separate working group preparing for the board’s launch. And it’s been confirmed that the yuan will be the currency for all trades.

Nevertheless, several key issues remain unsettled. Yet to be decided are questions about accounting standards, listing requirements, share sale limits, and rules governing how raised funds can be used.

Indeed, there are plenty of controversies that could affect the launch of the international board, for which an official target startup date has not been announced. At worst, unsettled issues could park the project on the runway.

Longing to List

Tokuchi said up to six foreign companies have shown interest in listing on the Shanghai exchange. These include the banks HSBC and Standard Chartered, and the stock exchange NYSE. “It is very likely that they will list in the next two to three years,” he said.

Responding to a recent rumor that a red chip company would list on the Shanghai market this year, Tokuchi said that listing may be delayed until 2010. But he said the first company to list on the international board probably will be a red chip company.

A source tied to regulators told Caijing that a stable stock market could lead to a speed-up in preparations for red chip stocks now trading in Hong Kong to join the A-share market. Reportedly, these would include China Mobile and CNOOC.

Tokuchi predicted two to three companies, including red chips and foreign invested companies, would list on the Chinese stock market next year. Over the next five to six years, 20 to 30 companies will list. And within 15 years, he said, more than 100 mature companies will have listed on the Shanghai exchange.

According to Tokuchi’s analysis, foreign companies willing to list in Shanghai are mainly multinationals with fairly big stakes in China. Companies such as NYSE and HSBC aim to further integrate China into their global strategy maps.

However, some foreign companies are quite reserved about listing in Shanghai. Key reasons include listing requirements, fund-raising target rules, share price differences and delisting requirements.

Step By Step

The public first heard an official proposal for opening an international board in April 2007, when the Shanghai Stock Exchange released a Market Quality Report suggesting a new way for overseas companies to issue A shares.

CSRC released a draft regulation for a pilot program a month later, allowing overseas red chip companies to list on the A-share exchange. But for various reasons, the red chip A-share return plan was postponed two years.

Two years passed before the State Council confirmed that Shanghai would be promoted as an international center for finance and shipping – a move that brought the idea of an international board back to the table. After that, for the first time, CSRC and Shanghai exchange officials added the international board concept to the government’s working agenda. Last May, exchange chief Zhang publicly called for steadily advancing preparations for the international board.

Tu Guangshao, deputy mayor of Shanghai and former CSRC deputy chairman, later said overseas companies should be given access to the A-share exchange as part of the city’s long-term goal to build an international financial center.

Technical Bumps
Some technical issues, such as what kind of accounting standard should be used, market pricing and whether companies on the international board should be required to invest in China, are still being discussed.

Industry professionals say it’s unrealistic to require companies to comply with certain Chinese bookkeeping rules. “It is too costly for an international company with assets all over the world to comply with Chinese auditing standard,” said Zhu Junwei, general manager of capital markets with UBS Securities.

Changing to Chinese from international accounting could cost a company from US$ 5 million to more than US$ 10 million. “This is not even a one-time charge,” Zhu said. “Every year, a listed company would have to pay auditing fees.”

A senior executive at a securities firm, who asked not to be named, said international board listings should not follow in the footsteps of so-called panda bonds — yuan-denominated bonds issued by foreign companies in China.

Friction was apparent in October 2005 when International Finance Corp. (IFC) issued 1.13 billion yuan in pandas, and the Asia Development Bank used the bonds to raise 1 billion yuan. Both offered the bonds on interbank markets.

Neither issuer would accept a Chinese regulation requiring panda bonds to comply with Chinese accounting standards. After lengthy negotiations, IFC and the bank were exempted from the accounting rule and allowed to follow international credit rating and accounting standards. But they paid a price: Their bond offers were postponed several times by regulators.

Zhang recently told Caijing, “Listed companies on the international board should comply with Chinese regulations.” But he also noted that, as the nation’s corporate and securities laws currently only apply to domestic companies, the legal framework should be restructured for foreign companies that want to list A shares.

Other technical challenges surround IPOs. Lou Gang, a China strategist with Morgan Stanley, said launching an international board would test the current system for launching IPOs.

“With too much intervention by the government, listing access has become an asset,” Lou said, adding that the current review and approval procedure has become an obvious obstacle.

China could learn from its neighbor Japan, which set up an international board in the 1980s. By 1991, up to 131 foreign companies had listed on the Tokyo Stock Exchange.

Later, with the collapse of an asset bubble, many foreign companies delisted. And in April 2004, the Tokyo exchange canceled its foreign division. It then gave foreign and domestic companies equal rights and status.

Chen Changjie, an attorney with local law firm Guangda, said Japan’s international board failed due to a complex, tedious review and approval process.

Another issue for architects of a Chinese international board is that the proposal has intensified competition between Shanghai and Hong Kong.

“This affects the status of Hong Kong and Shanghai, and which one is more important,” said a Beijing-based securities executive. “In the environment, in which the yuan currency is not exchangeable, Shanghai can hardly be called an international financial center.

“All these issues are not easily resolved in the short term,” said Lou. “So the international board does not present a rosy picture.”

Source: Caijing Magazine, 15.10.2009 by staff reporters Fan Junli and Shen Hu

Filed under: China, Exchanges, News, , , , , , , , , , , , , ,

Deutsche Bank securities JV with Shanxi Securities gets China approval

The license allows Zhong De Securities to underwrite A-shares and domestic Chinese bond issues.

Deutsche Bank announced yesterday that its joint securities venture with Shanxi Securities has received a business license from the Chinese regulators, meaning it is now free to launch investment banking services targeted at the domestic Chinese market. The license was granted about six months to the day after the two firms got the approval to set up the JV and makes Deutsche the fifth international bank to gain access to China’s equity and bond markets after CLSA, Goldman Sachs, UBS and Credit Suisse.

In accordance with the prevailing Chinese regulations, Deutsche owns 33.3% of the Beijing-based JV — named Zhong De Securities — while Shanxi Securities owns the remaining 66.7%. The business license allows Zhong De to underwrite and sponsor Chinese A-share issues, as well as government and corporate bonds, but not to conduct brokerage operations. It is believed that the new firm will initially focus on large-scale equity issues, but in the longer term it is likely that Zhong De will want to take advantage of Deutsche’s expertise in the international bond markets and get more involved in China’s rapidly growing corporate bond market as well.

Stock broking is one of the most profitable areas of the securities business in China, but new regulations issued in December 2007 stipulate that Sino-foreign securities JVs will have to wait five years after their establishment to obtain an A-share brokerage license.

Deutsche Bank’s head of China corporate finance, Charles Wang, has been appointed CEO of the JV, while Shanxi Securities’ president, Wei Hou, will become chairman. Wang is an experienced investment banker who has been with Deutsche bank for three years. Before that he spent 12 years with Merrill Lynch. During his career he has focused primarily on equity and advisory, which reinforces the suggestion that Zhong De’s initial focus will be on A-shares.

Deutsche will nominate three members to Zhong De’s nine-person board of directors, including Wang and one independent director. Shanxi Securities will nominate the other six, which will include the chairman and two independent directors.

While current Chinese regulations caps the investment by foreign banks in a Sino-foreign securities JV at 33% and direct stakes in a securities firm at 20%, the international banks are all striving to get as much management influence as possible. While abiding by the ownership rules, Goldman Sachs and UBS both have effective operational control over their China businesses. However, both these firms received a special dispensation because they got involved in securities firms that were distressed and it is widely believed that Beijing will not allow more similar set-ups under the existing regulations.

Deutsche Bank didn’t comment on the level of management influence it expects to have, but a source said that as CEO Wang will be responsible for appointing most of Zhong De’s senior managers. Meanwhile, Shanxi Securities will appoint the chairman of the supervisory board.

“Zhong De Securities combines unique strengths from both of its shareholders,” Wang said in a written statement. “We have the personnel, experience, infrastructure and ambition to become a leading firm within China’s domestic financial services market.”

Zhong De gets the go-ahead just as China is re-opening its A-share IPO market, which was suspended in September in light of the financial market turmoil, which saw both Chinese and international equity markets tumble. In late June, Guilin Sanjin Pharmaceutical became the first company to receive approval for an initial public offering after the sharp rise in Chinese share prices this year had indicated that the market would be able to absorb new issues. However, the regulators have been allowing smaller companies to go public first, no doubt to test the waters. Guilin Sanjin, a manufacturer of traditional Chinese medicine, sold Rmb910.8 million ($133 million) worth of shares, or 44% more than it initially planned, after the offering ended up heavily oversubscribed. The deal was arranged by China Merchants Securities.

According to media reports, another three companies have also received approval for A-share IPOs so far, including Hong Kong-listed Sichuan Expressway.

Deutsche Bank is the second international bank to get approval for a Sino-foreign securities JV since a moratorium on such JVs was lifted in May 2007 and since the new regulations were announced in December 2007. A JV between Credit Suisse and Founder Securities received its final business license in January this year and has been underwriting a few corporate bond issues since then.

Goldman Sachs and UBS were both allowed to set up businesses in China before the new rules took effect, in 2006 and 2007 respectively, but chose different routes to do so — Goldman through a joint venture with Gao Hua Securities and UBS through its direct 20% stake in Beijing Securities.

Meanwhile, CLSA has a JV with Hunan-based Fortune Securities under the name of China Euro Securities (CESL), which was set up in 2003 under regulations that were introduced as a result of China’s entry into the World Trade Organisation in 2002. Pursuant to the five-year rule, CESL was granted a brokerage license for the Yangtze River Delta area in June last year in addition to its underwriting license and the firm is now focusing primarily on the brokerage business.

The only other international investment bank to have direct exposure to China’s domestic market is Morgan Stanley, which set up the very first JV (China International Capital Corp) together with China Construction Bank in 1995. This “pilot” programme turned out to be a one-off at the time though and no further approvals were granted until after China’s WTO entry. Today, Morgan Stanley has no management input into the JV, but receives revenues in proportion to its 33% stake.

Morgan Stanley signed a memorandum of understanding with Huaxin Securities in early 2008 to establish a JV where it would be more actively involved, but this is still awaiting regulatory approval. Another firm waiting for approvals is Citi, which signed a MoU for a securities JV with Zhongyuan Securities around the same time in early 2008.

For Deutsche Bank, this license means that it is now able to offer all of its core global businesses in China as well. The German bank has made significant investments in China over the past 18 months and currently has a 30% stake in Harvest Asset Management and a 13.7% stake in Hua Xia Bank. It also has a derivatives license and is locally incorporated in Beijing, which means it can roll out a branch network should it decide to do so.

Shanxi Securities was founded in 1988 among the first group of securities firms to be set up in China. According to a statement in January, when the approval for the JV was received, it has more than 53 branches in Shanxi province and other major cities, including Beijing, Shanghai and Shenzhen. At that time, it had 800 employees.

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Source:, 08.07.2009 By Anette Jönsson

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SZSE Chinese bourse set to lure domestic flotations

With the market for initial public offerings opening up again, the scramble among bourses has started for the hundreds of Chinese companies planning to list to raise capital.

Small and medium-sized companies in China have in recent years opted to list on global exchanges. But now the fightback has started among Asian countries to grab a slice of the action – not least from China itself.

China appears ready to establish an equity market on its Shenzhen stock exchange for small and medium-sized companies, along the lines of London’s Alternative Investment Market (Aim).

Listing rules for the new market, called the Growth Enterprise Board, will take effect on July 1 but people close to the situation do not expect trading on the new board to begin for many weeks and possibly not before the national holiday on October 1.

Many Asian companies have opted to list in Europe or the US because of a perception there was greater liquidity in those markets.

However, many of the companies that listed on London’s Aim or Singapore’s junior bourse experienced poor analyst coverage and low trading volumes, which depressed the stocks.

The trend has now reversed amid a growing belief among Asian executives that they no longer need to list so far away from home to access capital.

Peter Alexander, of Z-Ben Advisors, an investment consultancy in Shanghai, says it is “just a matter of when the trigger is pulled” for the new Chinese market to be established.

Others caution that the plans are still dependent on investor reception of the resumption of IPOs on China’s main exchanges.

There are no official data detailing how many companies have plans to list in the new market but CY Huang, president of greater China investment banking for Taiwan’s Polaris Securities, estimates that there are at least 300 companies queuing up to be among the first to list on the new market.

Analysts say the new board should help plug a gap that exists in China’s capital market.

“For small and medium-cap companies, the only option now [for venture capital companies to exit an investment] is a trade sale . . . but it’s a long process,” says Cathy Yen, general manager of AsiaVest Partners, referring to the practice of selling shares/assets of a company privately to a strategic investor.

The new board will provide an IPO platform for technology and other small and medium-sized enterprises – Beijing policymakers put high priority on encouraging innovative companies.

China’s new market comes as the financial crisis is presenting a unique opportunity for other exchanges to challenge Nasdaq in the US as the destination of choice for start-ups, particularly among technology companies.

“Nasdaq has always been the first choice but that is starting not to be the case . . . now people are naturally forced to think about other boards,” says Tina Ju, managing partner of the Chinese arm of Kleiner Perkins Caufield & Byers, the US venture capital fund.

That is largely because of the difficulties of pulling off a successful public offering in current market conditions. There have only been two listings in Nasdaq so far this year compared with 11 over the same period last year, according to data from Thomson Reuters.

China’s new market comes as other exchanges in the region eye up similar opportunities.

Japan now has its own Aim market. A joint venture by the Tokyo and London stock exchanges, it received its licence this month and is targeting about five listings in its first year although the initial focus appears to be on Japanese companies.

The Taiwan stock exchange, recently revitalised by the island’s warming of relations with China, is also aggressively pursuing listings by Taiwanese companies that had moved to mainland China.

Chi Schive, Taiwan stock exchange chairman, says that, while “Shanghai and Shenzhen are respectable rivals . . . for the time being I don’t think that threat is very strong [in attracting Taiwanese companies]”.

While Japan and Taiwan are only now gearing up their efforts, other markets in Asia have made similar attempts before – with little success.

Singapore’s Aim-style exchange, known as Catalist, has failed to gain much traction since it was set up in December 2007 to replace Sesdaq, the city state’s secondary board.

Catalist has attracted few new listings since its launch, which Singapore Exchange officials blame on the global financial turmoil.

Similarly, Hong Kong’s Growth Enterprise Market (GEM) attracted some initial attention but trading volume has since fallen drastically.

For China’s new board, there is concern over how many of the companies lined up for funds “are genuine, viable long-term businesses” says Fraser Howie, China stock market expert and author of Privatising China: Inside China’s Stock Markets. “Is the competition driving standards lower?”

For many, China remains “a gamble market”. While some companies can fetch very high valuations, “the question would be how sustainable this would be and right now we just don’t know”, says Ms Yen.

Mr Huang says the biggest concern for prospective listings is that “China is the one stock market where you cannot control your [listing] time-frame” because of the government influence over market operations. “In China, the biggest risk is policy,” he adds.

Source: Financial Times, 23.06.2009 by Robin Kwong Additional Reporting by Patti Waldmeir in Shanghai, Lindsay Whipp in Tokyo, John Burton in Singapore and Sundeep Tucker and Xi Chen in Hong Kong

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