Chinese state firms looking malnourished in 2013: report

January 3, 2014 Leave a comment

Chinese state firms looking malnourished in 2013: report

Staff Reporter

2014-01-01

Among the 100 Chinese companies whose market value shrunk the most in 2013, 80% are state-owned enterprises (SOEs). Of this figure, 38 are central government-owned enterprises and suffered a total value erosion of 1.3 trillion yuan (US$215 billion), while the combined market value of 42 local state-owned businesses fell by 741.2 billion yuan (US$122 billion).Six state firms sit on the top 10 list with China National Petroleum Corp (CNPC) having seen the highest market value decline among all state firms. CNPC’s market value slipped from 1.46 trillion yuan (US$241 billion) at the beginning of 2013 to 1.24 trillion yuan (US$204 billion) by the end of the year.

In addition to CNPC, state companies that are on the top 10 lists are China Shenhua Energy Company, the Industrial and Commercial Bank of China (ICBC), the China Life Insurance Company, the China Petroleum & Chemical Corp (Sinopec) and the Bank of China (BOC), whose combined market value shrunk by nearly 600 billion yuan (US$99 billion) this year.

Other Chinese firms in the top 10 list are the Agricultural Bank of China (AgBank), the Kweichow Moutai Company, the Jiangsu Yanghe Brewery and Wuliangye. Yanghe’s value dwindled by 59.5% this year, suffering the worst value loss, compared with other Chinese firms.

Industry-wise, the banking sector suffered the widest loss in value at 424.9 billion yuan (US$70.2 billion). The ICBC, AgBank, BOC, Bank of Communications, China Merchants Bank, Bank of Beijing, China CITIC Bank, China Everbright Bank and the Shanghai Pudong Development Bank are on the top 100 list with their market value evaporating by more than 400 billion yuan (US$66 billion) in total.

The banking industry was followed by mining exploitation and beverage manufacturing with its market value falling by 388.5 billion yuan (US$64 billion) and 262.4 billion yuan (US$43.3 billion), respectively.

The coal exploitation market suffered the largest margin decline, falling by nearly 40% this year. Nineteen coal-related businesses were listed in the top 100 list with their market value shrinking by 388.5 billion yuan (US$64 billion) in total, Investor China reported.

The market demand for coal remained lackluster this year, leading to a significant decline in prices.

On China’s A-share market, Chinese liquor companies faced the largest blow to value. The market valuation of Jiangsu Yanghe suffered the largest decline this year, dropping by nearly 60% from 100.8 billion yuan (US$16.6 billion) at the beginning of this year to the current 40.8 billion (US$6.7 billion).

Net revenue for 14 listed liquor suppliers dropped by 48.9% to 27.96 billion yuan (US$4.6 billion) during the first three quarters of the year.

The decline was attributed to the prohibition imposed on extravagant official consumption.

 

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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