Pedal to the Metals in Hong Kong

06/22/2009 11:27 am EST

Focus: GLOBAL

Lawrence Roulston

Editor and Publisher, Resource Opportunities

Revived domestic growth is spurring Chinese investment in mines and raw materials, writes Resource Opportunities editor Lawrence Roulston.

There is perhaps no better place from which to contemplate the outlook for the mining industry
than a hotel room overlooking the bustling Hong Kong harbor. Mining has become an important topic in this Asian financial center. Mines and Money, which has long been an important event for the mining world in London, [conducted] its second annual gathering here in Hong Kong.

Interest in the mining industry continues to wane in the Western world. At the same time, Asia is becoming keenly interested in the industry that supplies the raw materials that are critical building blocks for emerging economies. At last count, 23 of the 100 largest mining companies in the world are Chinese. The Hong Kong Stock Exchange is making a strong bid to mining companies, both local and international, to list in Hong Kong.

China's stake in the world mining industry will inevitably continue to grow, as those companies are now scouring the world in search of metal deposits when investors in the Western world want little or nothing to do with resources.

A quick glimpse of the frantic activity in the harbor and around this city makes it vividly clear why Chinese companies have a bullish outlook for metals. The Hong Kong stock exchange has gained 62% in the past three months. Investors in many parts of the world see the Hong Kong market as a way to access the continued strong growth in mainland China.

While General Motors works its way through bankruptcy proceedings, the company still intends to build its ninth manufacturing plant in China. GM, in a 50/50 partnership with a Shanghai-based company, sold 1.09 million vehicles in China last year. They expect that figure to reach two million within five years.

Property prices throughout Hong Kong and China are rising sharply, erasing the losses of the past year. Rival developers are in bidding wars to gain access to development sites. Residential and commercial building sites are changing hands at values equivalent to hundreds of millions of dollars. Shanghai and Beijing have both joined the list of the 50 most expensive cities in the world for retail space. Hong Kong presently sits in the number three position, behind only New York and Paris.

Other tidbits from [a recent] South China Morning Post:

• Beijing Capital international Airport handled 5.24 million passengers in May, up 16% from a year earlier, [despite] a drop in international travelers.

• The Shanghai Composite Index is now at the highest level in 10 months. Money keeps pouring
into the stock market on expectations of economic recovery, according to an analyst from a big Chinese securities firm.

• Industrial and Commercial Bank of China is now the world's biggest bank (based on market
capitalization).

One of the speakers at the conference noted that China has gone from being a net recipient of foreign direct investment in its mining industry to being net investors abroad. Chinese mining companies are aggressively investing to acquire resource projects around the world.

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