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Xinhua Finance and Milken Institute Launch China Indicators

Xinhua finance; Milken Institute
2006-11-16 10:54 3820

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 .

Source: Xinhua finance; Milken Institute
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