Emerging Markets : Markets Recover To Former Heights



Bernanke and

Paulson: Leading visit

Chinas domestically listed stocks approached record highs in early December after Shang Fulin, chairman of Chinas stock market regulator, indicated that channels for foreign investment will be further opened. The benchmark Shanghai Composite index closed at 2161 on December 6, less than 100 points shy of its all-time high of 2245 set in 2001. The recent success of the stock market, which hit an eight-year low in mid-2005, comes after years of unsuccessful government efforts to revive the flailing performance of domestic stocks. The rapid rise in prices may, however, present a new problem to regulators: slowing down. Concerns over possible rate increases and other policy moves brought stock prices down somewhat in the days after hitting the December 6 high mark.

As Global Finance went to press in mid-December, US Treasury secretary Hank Paulson was due to lead a group of top-level US government officials, including Federal Reserve chairman Ben Bernanke and several cabinet members, on a visit to China. Paulson visited China in September and has proposed semi-annual trade meetings between the two countries.

Banking giant Citigroup led a group of foreign and domestic investors to purchase an 85.6% stake in Guangdong Development Bank for $3.06 billion in November. The purchase will give Citigroup, which has lagged behind many of its international competitors in the Chinese market, unprecedented control over the day-to-day operations of a Chinese bank. The Citigroup-led consortium beat rival bank Socit Gnrale in a prolonged bidding war for the struggling Guangdong bank. Regulators rejected Citigroups original bid in early 2006 because the deal would have violated foreign ownership limits for Chinese banks.

Consumption in China showed no sign of easing as the country overtook Japan to become the worlds second-largest automobile market. Several foreign producers have introduced models specifically designed for the Chinese market, while Chinas domestic manufacturers are rapidly improving manufacturing processes and quality controls with hopes of exporting to North America and Western Europe.

Thomas Clouse