MAD Indicator Shows Increasing Reliance on Equity Capital Financing Among Chinese Companies

MAD Indicator Shows Increasing Reliance on Equity Capital Financing Among Chinese Companies

February 02, 2007

    SHANGHAI, China, Feb. 2 /Xinhua-PRNewswire/ -- Xinhua
Finance and Milken Institute released updated values for
the Market Adjusted Debt (MAD) Indicator for the second and
third quarters of 2006, both of which dropped from the first
quarter 2006 and were lower than a year prior.  

    (Logo: http://www.xprn.com.cn/xprn/sa/200611140926.gif
)

    The quarterly released MAD indicator focuses on China's
debt 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.  The MAD indicator for
the second quarter of 2006 was 11.3, falling 10.9
percentage points from the first quarter, and 6.6
percentage points from a year prior.  The indicator value
for the third quarter 2006 was 15.5, which is a 4.2
percentage point increase from the previous quarter and 5.5
percent point decrease from a year prior.  The updated
indicator chart can be found at
http://www.xinhuafinance.com/en/charts/mad.html and
http://www.milkeninstitute.org/chinaindicators .

    The indicator decrease in the second quarter 2006 was
partially determined by seasonal factors.  Blue chip
companies such as China Unicom (A share, 600050; H share,
0762) and Baoshan Iron & Steel (A share, 600019) are
among those companies that had significant changes in book
value during this period.  China Unicom retired
approximately 5.6 billion yuan in debt from March to June
2006.  In the same period, Baoshan Iron & Steel also
reduced its long-term loans by 2.5 billion yuan.  The
domestic interest rates rises in April and August also led
to a lower market value of outstanding debts. 

    Furthermore, the performance of the Chinese stock
market contributed significantly to an increase in
companies' market value.  The free-float market
capitalization increased by 36 percent in the second
quarter of 2006, and another seven percent in the third
quarter of 2006.  All these factors combined pulled down
the indicator values.

    Glenn Yago, Director of Capital Studies at the Milken
Institute, pointed out, "The low mark-to-market debt
to equity ratio shows that Chinese companies continue to
rely on equity capital as major source of financing." 
 

    The MAD Indicator is calculated and released quarterly.
 The next releases of the indicator will be in March 2007. 


    The MAD Indicator is one of the eight economic
indicators designed to increase transparency and data
quality in China's burgeoning financial markets.  The
series applies the world-class index calculation
methodologies of Milken Institute, one of the world's
leading economic and financial research think tanks, and
the extensive data resources of Xinhua Finance, China's
premier financial information and media service provider.
The Xinhua Finance / Milken Institute China Indicators are
used by asset managers, underwriters, economists, and
product developers in assessing China's market environment
in support of investment decision-making. 

    To view additional information, visit
http://www.xinhuafinance.com/indicators or
http://www.milkeninstitute.org/chinaindicators . 

    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.  The Milken Institute has extensive
expertise in China and conducts ongoing research on China's
banking and capital markets.  It is based in Santa Monica,
CA.  For more information, please visit
http://www.milkeninstitute.org .

    Contact information:

    Xinhua Finance
    China
     Ms. Joy Tsang
     Tel:   [phone]
     Email: [e-mail]
    
    Japan
     Mr. Jiong Sun
     Tel:   [phone]
     Email: [e-mail]
    
    Taylor Rafferty (Media contact for Xinhua Finance)
    Japan 
     Mr. James Hawrylak
     Tel:   [phone]
     Email: [e-mail]
    
    United States
     Ms. Ishviene Arora
     Tel:   [phone]
     Email: [e-mail]
    
    Europe
     Mr. John Dudzinsky
     Tel:   [phone]
     Email: [e-mail]
    
    Milken Institute
    
     Ms. Jennifer Manfre
     Communications Manager
     Tel:   [phone]
     Email: [e-mail]


SOURCE  Xinhua Finance Limited; Milken Institute