The emergence of China as an economic superpower

"I hope the community will understand that it is impossible to keep breaking records year after year," said Joseph Yam, Chief Executive of the Hong Kong Monetary Authority. At this point in time, with the exception of yesterday and this morning's rebound in the US market, even Hong Kong's own record-breaking Exchange Fund expects turbulent times in the market, and advise cautiousness.

Listed companies in Hong Kong also exhibits careful expansion, as larger companies regain losses from record lows and seek cooling-off period in further acquisition plans. Coal and mineral mining are clear winners in China.

The Exchange Fund, a key player in the last financial crisis in Hong Kong and a record investor (has more than $18 billion under management at the end of 2007), expects less of a gain in 2008, most likely attributed to the disappointment in equity markets earlier this month and a potential slowdown in the US. "Growth might fall sharply should the U.S. housing slump continue and the tightening of credit conditions persist or even get worse," warned Yam, who sees the meltdown of global credit markets not exactly a far-fetched possibility.

Insurance giants Ping An and China Life are experiencing slower growth as Chinese stock markets were hit heavily last week. Ping An, for example, makes 30% of its revenue from equity and fixed-income markets within China. A slowdown in the US economy, therefore, puts negative light on the insurers' prospects. However, analysts believe that investors will see the Fed rate cut as a sign of improvement, and rely on the insurers' fundamentals to maintain a long position within the coming weeks. As a side effect, the Heng Seng Index in Hong Kong surged 11% yesterday, its sharpest gain in a decade.

There is also good news in energy and mining; China Coal Energy Co., China's second largest coal producer, raised about $3.5 billion from its Shanghai offering, a record since the slump last week. Confidence raised by the offering partly led to a 4.7% rebound in China's CSI 300 Index yesterday. Sino Gold Mining Ltd., the second largest gold mine in China, also brought good news to the market: its fourth quarter output gained.

However, the majority of businesses remain its steady outlook. China Mobile is seeking to expand its rural home market than inorganic growth. It maintains that mobile phone companies in other emerging markets is too expensive, therefore not their first priority. Expansion into rural areas was responsible for 50% of China Mobile's growth last year. China Oilfield Services, a subsidary of China's third largest oil producer, was also lacking in foreign market plays. The Russian government stopped its takeover bid of BP plc's drilling unit in Moscow. The company will seek other acquisition targets due to this setback.

Do you think the Chinese market is on the rebound?