Initial Three Indicators Gauge Pressure on Renminbi, IPO Market Performance
and Capital Structure of Chinese Companies
SHANGHAI, Nov. 16 /Xinhua-PRNewswire/ -- Xinhua Finance Ltd. (TSE
Mothers: 9399 and OTC: XHFNY) and the Milken Institute has released the first
three of eight new economic indicators tracking China’s financial markets.
The three indicators, whose launch was announced on November 15 at the US-
China Executive Summit held in New York, are aimed at providing investors,
analysts and financial professionals with deeper insight into China’s money
and capital markets. According to the CEO of Xinhua Finance, Fredy Bush, they
“greatly demystify the Chinese macro economy by matching the rigor of the
Milken Institute’s empirical methodologies with the rigor of Xinhua Finance-
compiled data.”
The first three of the Xinhua Finance/Milken Institute China Indicators
series objectively evaluate three important facets of China’s economy: the
currency market, the equity capital market and the debt capital market. They
are:
Renminbi Pressure Indicator (RPI): The monthly RPI measures the
appreciation pressure on the renminbi, mainly relative to the U.S. dollar, by
combining data on exchange rates, foreign exchange reserves and interest
rates. This indicator shows that upward pressure on China’s currency
increased 14.6 percent from July 2004 to July 2005, when the currency was
revalued. In the 12 months since the revaluation, the pressure has slowed to
9.4 percent.
Chinese Initial Public Offering Indicator (IPO Indicator): The monthly
IPO Indicator offers a summary of composition and performance changes in the
Chinese IPO market, as measured by market capitalization. Its release
coincides with resurging interest in Chinese new issuances, such as last
month’s record-breaking IPO of Industrial and Commercial Bank of China in
Hong Kong and Shanghai. The indicator, composed of a monthly average of 102
companies, shows an 80 percent price appreciation in new issues from December
1997 to August 2006.
Market-Adjusted Debt Indicator (MAD Indicator): The quarterly MAD
indicator focuses on China’s debt capital market. It measures the capital
structure of Chinese companies, using a long-term debt-to-equity ratio based
on market value, instead of book value. It shows that, from 2001 to the first
quarter of 2006, the amount of market debt outstanding increased from 6.6
cents to 22.2 cents for each dollar of equity capital, a 236 percent
increase. This indicator finds that Chinese firms are underleveraged when
compared with their counterparts in developed countries.
Ms. Bush said that she is proud of Xinhua Finance and Milken Institute’s
unprecedented initiative toward delivering greater transparency and
efficiency to the Chinese financial market.
“The indicators contribute more useful, quantitative ways of looking at
China’s financial markets. They advance our organizations’ joint mission of
facilitating market growth by laying the groundwork for the development of
robust foreign exchange, corporate bond, equity and derivatives markets.”
Milken Institute President and CEO Michael L. Klowden agreed that the
indicators are an important new tool to help understand China’s markets.
“The three indicators will benefit a wide set of market participants as
they can be used as effective tools to judge and assess market circumstances
and movements in support of investment decision-making,” he said.
Xinhua Finance, China’s leading financial information and media
organization, and the Milken Institute, one of the world’s leading economic
and financial research think tanks, agreed in April to create a set of eight
new economic indicators tracking China’s markets. The indicators use Xinhua
Finance’s extensive local data-gathering capabilities in the production
process and the Milken Institute’s expertise and established methodologies
for capital-market research.
The other five indicators to be launched in 2007 are the Chinese Banking
Sector Indicator, the Chinese Mergers and Acquisitions Indicator, the Chinese
Privatization and Joint Venture Indicator, the Chinese Corporate Governance
Indicator and the Trade Openness Indicator.
For more information, go to http://www.xinhuafinance.com/indicators or
http://www.milkeninstitute.org .
About Xinhua Finance Limited
Xinhua Finance Limited is China’s unchallenged leader in financial
information and media, and is listed on the Mothers board of the Tokyo Stock
Exchange (symbol: 9399) (OTC ADRs: XHFNY). Bridging China’s financial
markets and the world, Xinhua Finance serves financial institutions,
corporations and re-distributors through four focused and complementary
service lines: Indices, Ratings, Financial News and Investor Relations.
Founded in November 1999, the Company is headquartered in Shanghai with 20
news bureaus and offices in 19 locations across Asia, Australia, North
America and Europe. For more information, please visit
http://www.xinhuafinance.com .
About the Milken Institute
The Milken Institute is a nonprofit, independent economic think tank
whose mission is to improve the lives and economic conditions of diverse
populations around the world by helping business and public policy leaders
identify and implement innovative ideas for creating broad-based prosperity.
It is based in Santa Monica, CA. For more information, please visit
http://www.milkeninstitute.org .