HARBIN, China, April 16 /PRNewswire-Asia/ -- China Green Material Technologies, Inc. (OTC Bulletin Board: CAGM) announced today it has filed its annual financial report for 2008 with the SEC on March 31, U.S. time. The report shows the company still maintained a good momentum of growth in the end of the fiscal year after three consecutive profitable quarters, and the revenue and the gross profit grew by 27% and 49% respectively. Amid a global economic downturn, the Chinese manufacturing industry has been going through a capital crisis, with many companies going bankrupt, and shares of many Chinese Concept companies listed overseas have experienced several plunges. With bad news coming out frequently, CGMT credits itself for its outstanding performance under these conditions.
Affected by exchange rate fluctuations and China’s new "Labor Law", CGMT administrative and payroll expenditure increased in 2008 compared to 2007; the product cost increased along with the increase in orders; and with the optimization of marketing network allocation, not only was transportation time shortened, but operation cost was lower which led to increases in net profit of the product.
CGMT expects its profitability to sustain and its revenue to grow steadily in the future, based on the increase in orders and improvements on the marketing strategy in China mainland and gradual maturity of the management team. Investment and demands from the government in 2009 for environment-friendly products are increasing sharply, and CGMT remains optimistic as more environment-friendly policies continue to roll out by the Chinese government, and consumers pick up the trend in buying more green products.
Also, enterprises and investors began to hear some good news after 16 months of financial recession: consumer confidence is rising; exports of the developing countries are gradually picking up; stock markets worldwide are recovering; and market liquidity is increasing... The news from the world’s third largest economy - China -- is especially encouraging: it is reported that on April 10, the Chinese economic stimulus plan, which mainly focuses on infrastructure, has gained preliminary success.
These figures may not relieve investors’ concerns over the relatively poor performance of some listed companies, but the data from CGMT should not be taken badly, but is seen as a positive signal: the environment-friendly fast-growing industry that CGMT engages in is different from traditional industry, which is anticipated by many to act as an impetus to economic recovery.
The domestic economy continues to recover
Data newly released in China shows that the economic stimulus plan of an estimated 585 billion US dollars by the Chinese government seems to be taking effect. In 2009, January and February, the new bank loan is 2.7 trillion RMB (about 400 billion US dollars), and there is hint that this trend will continue into March. The stock market, which suffered a serious setback, has begun to rise. The composite index on the Shanghai Exchange Market exceeds 2,500 points in April, up 3%, and the cumulative increase of this year is over 35%.
China’s huge spending plan reflects the government’s power to control its economy, and there are some indications that Chinese consumers have also begun to expand spending. Because Chinese consumers have raised confidence in domestic economic conditions, the consumer goods market, especially the
fast-moving consumer goods market, is boosted. Although durable goods and bulk stock are still in the recovery stage, the real estate and automotive market has tended to stabilize.
The data published on April 9 shows that Chinese car sales in March hit a new monthly high, and this is the third month that car sales rose continuously. The home sales in major cities began to restore due to falling house prices. The operation prospect of the corporate has gradually become optimistic. China’s National Bureau of Statistics has said that the business confidence index in the first quarter has increased, which had dropped substantially in the fourth quarter of 2008.
A series of positive signals are accumulated. The UBS thought: China’s economic base will be formed in the first quarter in 2009, and there will be better recovery in the third quarter. The advice given by the UBS emerging market economist Jonathan Anderson on how to get profit from investment is to return to China. The prerequisites of his conclusion are: the Chinese government’s monetary policy and economic stimulus plan will boost the economy; meanwhile, it will not generate any US-style real estate collapse in China. At present, the two prerequisites are possible to be true.
The Chinese government is increasing investment in the economy, and the Government investment program will start hundreds of new infrastructure projects. The investment budget in the first two months of 2009 is increased by 88 percent over the same period last year, the highest increase in history.
Although the situation improved in China alone is not enough to reverse the global economic downturn, it is still good news for the global economy that China has begun to restore as the world’s third largest economy in the world.
The Chinese Concept Prevails, Private Equity Investment Just at the Right Time
With China’s economy being restored, the Chinese Concept becomes the hope to overcome the crisis. Based on the foreign exchange reserve and over 50% saving rate, the Chinese economic stimulus plan began to take effect, leading to commercial banks to enlarge credit loans, which contributes to the recent relatively adequate liquidity and investor high spirit, all creating a strong driving force which is being injected into the A stock market. At the same time, Chinese companies listed in the U.S. also have the chance to benefit from China’s economic stimulus package, and have a relatively lower valuation.
"So if you wait for the robins, Spring will be over." Buffett’s well-known wisdom comforts numerous cold hearts of investors. Although there is no fortune-telling to tomorrow’s market, if investors believe that the Chinese economy will not collapse, under the current market conditions, investors may pay attention to the high-growth assets.
A survey from the China Venture Capital Association for the first quarter of 2009 shows that, most private equity (PE) investors have not altered their confidence in long-term investment in China. The survey investigates 39 institutions which operate one-up VC and PE businesses in China. Of these, 97.4 percent of the institutions believe that it is the main opportunity that the corporate valuation is down and the investment cost will decrease under the economic downturn. Furthermore, 69.2% of the investment institutions consider that the current investment is more rational, and 43.6% of the institutions consider that the investors now focus more on the value-added services to enterprises. These are the positive factors for the industry’s long-term development.
The survey shows that foreign investment institutions will focus on environment-friendly industry, fast-moving consumer goods, service industry and medical and health areas in the next one or two years.
In fact, private equity investors invested 9.5 billion U.S. dollars in the Asia-Pacific region (excluding Japan) in 2008. China and India become the most active areas for the PE investment in the Asian region in recent years, and the investment amount in these two countries accounted for 82% of the total investment in Asia. At the same time, the investment number in China and India reached 318 and 267, also ranking first in the Asia-Pacific region.
Analysts generally agreed that: "The American financial recession blows the confidence of the global investors, but the impact on the investors interested in Chinese emerging economies is much smaller. Because the Chinese emerging industries are more independent, the American financial crisis can just impact on the performance of Chinese enterprises in the short term and will not impede the long-term rapid growth of China’s economy."
If investors deal with the economic downturn properly, it is even a good time to invest -- supported by the recent Warren Buffett move in buying a number of Chinese companies’ shares. Investors can take in mind that the rapid development of China’s environment-friendly industry is attracting more and more attention from the international investors.
CGMT’s cornstarch biodegradable packaging products are doing an excellent job in the China market, and the Chinese government is determined to develop the environment industry. These developments will attract more and more international investors, especially American investors. CGMT is bound to be the representative in the green industry to reverse the global economic situation and lead the wave of the new economy.
It is a good time for CGMT to identify itself in the tough American market and to attract investors’ attention based on its excellent performance in China and its fast-moving starch biodegradable consumer products.
For more information, please contact:
Meng Yang
Tel: +86-451-8269-5957
Email: secretary@chfy.com.cn
