Earnings growth drives down PE ratios
Strong earnings growth in the first-quarter has improved the average value of stocks on the Shenzhen and Shanghai exchanges to 31 times price-earnings (PE), the Shanghai Securities Journal reported. By April 28, the first-quarter fiscal reports of 1252 listed companies showed a 77.42% year-on-year increase in the average earnings per share for the quarter to RMB0.099. Average earnings per share for the full year of 2006 were RMB0.24, up 25.6% from full year 2005. According to China Securities Regulatory Commission data, Shanghai’s A-share average PE ratio had climbed from 19.42 times in March 2006 to 39.62 times in February this year, while Shenzhen’s rose from 18.78 times to 43.46 times. The fall to 31 times upon the announcement of first-quarter reports was the first fall after a year of upward PE movements.

QFII’s optimistic on markets: report
Lipper’s latest monthly QFII China A-share fund report, released in conjunction with the Shanghai Securities Journal, showed qualified foreign institutional investors (QFIIs) are optimistic about China’s A-share market. Morgan Chase China Pioneer Fund said strong capital support, improving profitability and strong economic data would continue to boost mainland stock markets, while regulatory controls over interest rates were within market expectations. Because the central government’s stance was still to facilitate growth, the fund expected relatively loose macroeconomic controls and remained optimistic about the finance, real estate and retail sectors. The ABN-AMRO Fund said investors seemed to be less concerned about government policy and more with company performances. The fund was still focused on property, machinery and consumption-related companies, but also had interest in pharmaceutical and electricity firms.

Vinda plans Hong Kong IPO
Vinda Group planned to raise US$129 million (RMB1 billion) through a Hong Kong IPO this year to expand production capacity, JRJ.com reported. Market sources said Vinda was preparing listing documents with the aim to complete listing before the third quarter. Merrill Lynch is the sponsor. Vinda, which has five production plants, is one of China’s largest producers of paper for sanitation and household goods. According to its website, its short-term goal is to reach 200,000 tons in annual production output and 500,000 tons over the long-term. According to the National Bureau of Statistics’ 2006 survey on national industries, Vinda is the mainland’s top lifestyle paper product market by sales volume. Sweden’s SCA earlier announced the company planned to buy a 20% stake in Vinda International.