world growth

world growth

Wednesday, May 19, 2010

China to buy 7 Brazil firms for $1.72 billion

RIO DE JANEIRO, - China's state-run electricity grid firm has agreed to buy seven Brazilian transmission companies from Plena Transmissoras for 3.1 billion reais ($1.72 billion), local media reported on Tuesday.

Plena, controlled by a group of Spanish energy firms, will sell seven of its 12 transmission divisions to State Grid Corp of China, according to the business daily Valor Economico, which cited a Plena official.

The deal, which is subject to regulatory approval, includes the transfer of 1.3 billion reais ($722 million) in Plena debt to the Chinese company, which will receive access to 3,000 kilometers (1,864 miles) of transmission lines in Brazil.

Plena, controlled by Spanish firms Elecnor (ENOR.MC), Isolux and Cobra, previously rejected buyout offers from Cemig (CMIG3.SA), run by Brazil's state of Minas Gerais, and Colombia's ISA group, Valor said.

The vast majority of Brazil's transmission companies are run by the Brazilian government.

Wednesday, May 12, 2010

Greece debt crisis lows China's exports to Europe

European debt crisis and the consequent sovereign credit risk of developed economies and a new round of global financial market turmoil have limited direct impact on China, but indirect effects can not be ignored.

Overall, China's holdings of Greek government bonds and the Greek financial institution's assets are limited, which means that even if Greece defaults on its debt, the direct impact on China is limited. But if the Greek debt crisis can not be effectively checked, and then spread to Portugal and Spain and other euro zone countries, then China will face bigger risks.

The EU is currently China's largest export market, once the fragile EU economic recovery was again drawn into the plight of this debt crisis, China's export situation will become even more complicated.

According to Chinese statistics, in 2009 bilateral trade volume between Europe and China reached 364.1 billion U.S. dollars, accounting for 16.5% of China's total global trade. China's exports to Europe reached 236.28 billion U.S. dollars, accounting for 19.7% of China's total exports. Affected by the economic crisis last year, China's exports to Europe plummeted by 19.4%, and this year because of the Greek debt crisis, the prospects of China's exports to Europe becomes uncertain.

Affected by the debt crisis, the euro fell against the dollar to 14-month low. The recent sharp rise in the renminbi exchange rate against the euro makes the situation of China's exports to Europe more and more severe.

In addition, some analysts have pointed out that the European economic outlook is not promising, a large number of hot money may turn to flow into emerging markets like China, and this will aggravate the pressure of RMB appreciation and the risk of economic overheating in China.

Saturday, May 1, 2010

Baidu profit doubled after Google's China exit, stock jumps $90

NEW YORK -- Shares of Chinese search company Baidu leapt by nearly $90 Thursday after the company reported that its profit more than doubled following rival Google's exit from the search business in China.

Baidu's (BIDU) stock climbed 14%, or $88.49, to $709.87 a share. The stock has risen more than 80% since Google first announced in January that it might end its search business in China. Shares of Google (GOOG, Fortune 500), meanwhile, have fallen 12% over the same time period.

Google moved its servers out of the country and stopped censoring its search results in China on March 22. Chinese authorities have responded by blocking access to to certain search results for users within the country's borders.

During the scuffle with China, Google lost a significant share of the Chinese Internet search market, much to Baidu's benefit. Many Chinese Web sites that had been using Google's search engine switched to Baidu's engine during the quarter.

Google's market share in China fell to 31%, down from 35.6% in the previous three months, according to online traffic analyst Analysys. Meanwhile, Baidu's share rose to 64% in the first quarter, up from 58.4% in the fourth quarter.

Still, Baidu's results surprised even the most bullish analysts.

Late Wednesday, the Chinese search giant reported first-quarter net income of $70.4 million, or $2.02 a share, up 165% from a year earlier. Revenue rose 60% to $189.6 million.

According to a Thomson Reuters poll, Wall Street expected earnings of $1.52 per share on revenue of $180 million.

The company, which raised its sales outlook, said it still has plenty of room to grow.
0:00 /1:15New Google tone in unwelcoming China

"For the rest of the year, we will aggressively expand our research and development and sales teams to drive improvements in technology and monetization," Jennifer Li, Baidu's chief financial officer, said in a prepared statement.

Some analysts think that Baidu's strong quarter and recent stock movement had more to do with Google's exit from the China search market than Baidu's fundamentals.

"Not much has changed except that Baidu's biggest competitor has left," said Daniel Ruby, research director at Chitika Inc., an online advertising network. "It's free and easy for Baidu now -- who's really left there to challenge it?"

But Ruby also said that Baidu has tremendous growth potential independent of its competition.

"No one has really found the key to monetizing search in China," he said. "You've got to expect that Baidu will find better ways to monetize the incredible market share that they have. So I don't think this growth is temporary."