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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: elmatador who wrote (45229)	1/13/2009 2:01:23 AM
From: TobagoJack	Respond to of 217786

just in in-tray Following is a summary of several policy and macro developments over the past two weeks. 1. Industrial profit growth falls rapidly to 4.9% yoy in Jan-Nov Industrial profit growth slowed sharply to 4.9% in Jan-Nov from 19% in Jan-Aug. SOE industrial profit growth performed even worse, posting a decline of 14.5% yoy in Jan-Aug reflecting in addition to weaker demand -- the negative impact of price controls on IPP and refining. We expect overall industrial profit to decline 10-15% in 2009 vs 2008's estimated 4% growth, based on our forecast of 7% GDP growth and the historical correlation between GDP and profit performance. 2. PBOC rate cuts The PBOC cut 1-year lending and deposit rates by another 27bps on December 23. We expect further rate cuts of 108bps in 2009. 3. Expansion of subsidy program for rural electronics sales The State Council decided to extend the subsidy program to support rural electronics sales from a pilot scheme in four locations to nationwide implementation. The new program will start form next year and last for four years. Under the new program, the government will subsidize 13% of selected electronics sales in the rural areas. The product brands (including mainly refrigerators, TVs, cell phones, and washing machines) to be included in the subsidy program are determined by auctions. This program will require a subsidy of RMB15bn from the government, and our estimate shows that it should boost (relative to the baseline scenario in which no subsidy is offered) white goods sales by about RMB30bn in 2009. This should enhance the growth rate of total white goods sales in the country by about 5ppts. 4. Auto policy The government is formulating a plan to revive auto demand. Auto sales growth decelerated drastically in recent months and fell to -15% in November. In November auto exports also recorded the first decline in six years. Many auto makers and distributors have begun to layoff workers. Against this backdrop, the government is now discussing rescue measures including cutting auto purchasing taxes (from the current 10%), increasing the VAT rebate on auto exports, and introducing further incentives for small cars and new energy vehicles. We expect some of these policies to be announced within the next few weeks. 5. 3G licenses As expected, the State Council authorized the Ministry of Industry and Information Technology (MIIT) to issue 3G licenses. Three licenses are likely to be issued within the next few days. 3G related capex amounting to about RMB150bn in 2009 should support the fundamentals of telco service providers and telco equipment makers. 6. Real estate policy On Dec 21, the State Council Office issued a new document on â€œpromoting healthy development of the real estate marketâ€. Among the new measures promulgated in this document and the follow-up PBOC circular, the two relatively more important items are: (1) shortening the applicable period of real estate business tax: previously sales of ordinary residential properties held for less than five years were subject to the business tax; under the new system, only properties held for less than two years will be subject to the business tax; (2) permitting banks to lower mortgage lending rates for second homes to 70% of the benchmark lending rate. So far only Shanghai has implemented the new policy on 2nd home mortgage rates. Jun Ma Chief Economist, Greater China Head of China/Hong Kong Macro Strategy Deutsche Bank Hong Kong 852-2203-8308