China targets asset bubbles: Deutsche Bank
Deutsche Bank said in a report released Wednesday the government was likely to take measures against potential asset bubbles as the benchmark Shanghai Composite Index closed on the symbolic 4000 point mark to prevent political and financial instability, Sina reported. Deutsche Bank chief economist Jun Ma said interest and deposit reserve ratio hikes had done little to slow the A-share markets upward march, which meant the People’s Bank of China was likely to increase the pace of macroeconomic tightening. Ma predicted that deposit reserve ratio and interest rate hikes would be complemented by other regulatory measures, including increased investigation of suspicious hot money and foreign capital flows by the State Administration of Foreign Exchange,  closer scrutiny of insider deals and suspicious pricing controls by the China Securities Regulatory Commission, and strengthened China Banking Regulatory Commission controls over bank financing of stock portfolios. Ma said the ultimate goal of any measures would be to dampen  market enthusiasm, especially among private investors. He also said a capital gains tax remained a possibility.

Analysts predict rate hike
The People’s Bank of China could strengthen macroeconomic controls, including a further interest rate hike, to slow the country’s economy in response to first quarter macroeconomic data showing that spending and investment continued to soar. Capital spending in China's urban areas picked up speed in the first quarter, rising 25.3% compared to 23.4% during the first two months of the year. Goldman Sachs chief economist Liang Hong told the Oriental Morning Post a second rate hike could come earlier than expected. “Although M2 has slowed from 17.8% to 17.3% in March, soon-to-be-announced GDP and CPI are likely to push for another interest hike,” Liang said. Analysts said a rate hike could occur during the Labor Day holidays in May. The bank raised benchmark deposit and lending rates 27 basis points on March 17, and lifted reserve ratio requirements by 50 basis points on April 16, which many analysts took as a further signal a rate hike was imminent. The newspaper also cited a government announcement on the front-page of the Financial Times on April 14 that it was considering a rate hike this year. It was the third such statement in two weeks.

Textiles exports fall in March
China’s textiles and garment exports fell in March, but not enough to erase an overall upward trend in the first quarter, Economic Information Daily reported, citing official statistics. March exports were down 24.3% year-on-year to US$7.98 billion, and 29% lower than in February, a National Development and Reform Commission (NDRC) report showed,. However, garment and textiles exports still grew 14.7% year-on-year to US$31.35 billion across the first quarter, while textile production increased 21.6% year-on-year to 4.17 million tons of yarn output over the same period. Media reports said the government may trim the export tax rebate on textiles to 9% from 11%, and on clothing to 9% from 13% to further reduce the trade surplus.

CITIC Capital forms PE fund
CITIC Capital Partners (CITIC CP) closed its first China-focused private equity fund with US$425 million and planned to launch several financing investments over the next few months, China Venture reported. CITIC CP managing partner Zhang Yichen said the fund attracted investment from CITIC Capital Holdings, Temasek, GE Capital, Siguler Guff, CDC, Orix and Sumitomo Trust & Banking. The fund has already invested in Harbin Pharmaceutical Group which is by far CITIC CP’s largest China acquisition. CITIC CP, which also manages a Japanese fund and two smaller US funds, is a subsidiary of CITIC Capital Holdings, a leading China-focused investment management and advisory firm.

ABC schedules overseas listing next year
Agricultural Bank of China (ABC) has started preparations for an overseas listing by late 2008 at the earliest, the Hong Kong Economic Times reported. Market sources said ABC has appointed China International Capital Corp, Merrill Lynch and Deutsche Bank as sponsors. It had also commenced asset evaluation, appointing Sallmanns as a property surveyor and Deloitte as an auditor. ABC owns the largest amount of properties among the four state-owned commercial banks with more than 10,000 branches, but it is the worst of the four banks in terms of financial performance and the only one not to have completed a public offering.

High-tech companies target Japan listings
A planned April 26 listing by Asia Media on the Tokyo Stock Exchange (TSE) is likely to be the first of many similar offerings by mainland high-tech companies on Japan’s main board, China Youth Daily reported. Kingsoft and Founder Tech were among those expected to follow in the company’s footsteps. TSE announced earlier that Asia Media would offer 52.38 million shares. Kingsoft president Lei Jun told the newspaper the company would spin off and list its Japan business unit in the near future, and internal sources at Kingsoft confirmed the TSE was being considered for the listing. Market sources said Founder had submitted information for TSE’s evaluation and hoped to list later this year. Analysts said TSE was given NASDAQ a run for its money as a preferred listing destination for China’s high-tech companies.