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Market Report Summary - 19 June 2015

Core Content

This report provides an overview of the market trends and developments in the China Coal Chemical Sector and the TMT (Technology, Media, and Telecommunications) Sector as of 19 June 2015. It also includes key indicators of equity indices, commodity prices, currencies, and interest rates.

China Coal Chemical Sector

Main Points

• Oil Price Rebound: In the first half of 2015, international crude oil prices rebounded over 30% from a low of US$47/bbl to above US$60/bbl, which has prompted western Chinese provinces with significant coal reserves to resume coal chemical investment.
• Investment Focus: The coal chemical industry is focusing on coal-fueled synthetic natural gas as the current investment hotspot. Clean coal technologies are expected to become the next area of investment.
• Economic Drivers: Local governments in western China are pushing for coal chemical projects to stimulate economic growth and reduce the impact of the coal industry downturn.
• Major Projects:
  • Shanxi: Announced Rmb293.9bn in coal chemical-related projects.
  • Inner Mongolia: Released policies to promote coal chemical restructuring and increase local coal resource conversion.
  • Xinjiang: Plans to convene interdepartmental meetings to accelerate coal chemical project development.
• Capacity Expansion:
  • Xinjiang confirmed 13 key coal chemical projects, with 10 focused on coal-to-gas, targeting an annual capacity of around 30bn cubic meters.
  • Inner Mongolia aims to build coal-to-gas capacity of around 34bn cubic meters, leveraging its proximity to the Beijing-Tianjin-Hebei market.
• Future Outlook:
  • Coal is expected to account for 65% of total fuel consumption in China by 2020.
  • Clean coal technologies, such as coal gangue utilization, low-density coal seam gas extraction, and coal grading, are being encouraged by the government.
  • Environmental regulations will drive investment in advanced equipment and pollution control technologies across various sectors.

TMT Sector

Key Highlights

• Qihoo 360: May relist in China after a private offer from its founder and other investors, with a purchase price of US$51.33 per share or US$77 per American Depository Share.
• Smartphone Penetration: Expected to rise to 73% in China in 2015, with slower growth compared to previous years due to high urban penetration.
• SoftBank and Robotics: Launched a joint venture with Alibaba and Foxconn to sell human-like robots globally, with SoftBank holding 60% of the stake.
• Shaanxi Broadcast & TV: Plans to raise RMB 955 million through a private offering to upgrade its network infrastructure.
• Cisco and China: Announced plans to invest over $10 billion USD in China-focused partnerships and projects in the coming years.

Stock Market Performance

Key Indices

Commodity Prices and Other Indicators

Key Commodity Prices

Interest Rates and Bond Yields

• HIBOR 3m: 0.39%
• USD LIBOR 3m: 0.29%
• US Treasury Yield (3m): 0.00%
• US Treasury Yield (10y): 2.33%
• China Treasury Yield (2y): 2.44%
• China Treasury Yield (10y): 3.60%

Key Takeaways

• The rebound in oil prices has spurred renewed interest in coal chemical projects, particularly in western provinces.
• Coal-fueled synthetic natural gas is currently the main investment driver, with clean coal technologies set to follow.
• The TMT sector saw notable developments, including potential relisting of Qihoo 360 and significant investments by companies like Cisco.
• The stock market experienced mixed performance, with declines in major indices like the Hang Seng and CSI 300, but some positive movements in others.
• Commodity prices showed varied trends, with oil and gold rising, while aluminum fell slightly.
• Interest rates and bond yields remained stable or slightly fluctuated, with the government and private sector continuing to invest in infrastructure and technology.