Thursday, November 22, 2007

CNOOC's Star Rising Amidst The Rubble

Following Petrochina, CNOOC would be my best pick, owing to it being the next big A-share listing by the H-shares. However, the edgy markets for the past 2 weeks may be delaying the A-share plans somewhat. Another thing to bear in mind is that the covered warrant is expiring in February 2008, which would have been ideal a few weeks back, but owing to the postponed A-share listing, may be a bit too short in life span to cover the Shanghai listing. Still, cannot beat CNOOC, especially when the Shanghai index gets closer to the crucial 5,000 level, which I am expecting to be a good base building area for China shares.

Call it coincidence, foresight or good planning, CNOOC's in the news today that it is considering buying interests in Nigerian blocks held by Royal Dutch Shell PLC- the latest indication of China's rising assertiveness in Africa's oil sector. As reported in the WSJ:

Shell is considering selling interests in two Nigerian offshore blocks as it restructures its business in the troubled region, people familiar with the matter said Tuesday. A block is a geographic area of territory over which the owner holds exploration and drilling rights. The Anglo-Dutch oil company has said it expected to sell about US$9 billion in assets in 2007. The block stakes, each amounting to 49.8%, could fetch as much as $900 million, adding that Nigerian oil companies had also expressed interest. Agip, a unit of Eni SpA, holds the remaining 50.2% in each block.

In January 2006, CNOOC, China's largest offshore operator by output, bought a 45% interest in Nigeria's Akpo field for US$2.27 billion. The same month, it bought a 35% interest in the license to explore for oil in a Nigerian offshore block. China is on course to overtake the U.S. as the world's largest energy consumer soon after 2010, according to the International Energy Agency, but its domestic oil production is set to peak around the same time, leaving a supply gap that will have to be filled by foreign oil. As a result, Chinese oil companies are investing massively in Africa, searching for oil to fuel the country's booming economy.

Sinopec, paid US$692.2 million for stakes in three deepwater oil blocks in Angola last year. China National Petroleum Corp., the parent company of PetroChina Co., has interests in Sudan. In addition to direct investments by oil companies, China's government has used a strategy of offering loans and aid to African countries to secure access to resources.


The Rock said...


Given the negative news flow and correction that is happening now, I would think that Cnooc may delay their IPO plan until the market stabilise so that they can get a better valuation. The additional supply of shares by big guns like Shenhua, Petrochina is already having the effect of absorbing the money from other stocks in China. Thus the index is unlikely to go higher as long as more supply of shares are coming.

The 2000 tech bubble was pricked when so many dubious tech shares were listed at rediculous valuation. While these Chinese companies are big blue chips unlike the tech stocks in the 2000 US bubble, but the valuation is a bit high especially in view of below par US economic growth seen in the next few years as the over supply of houses and credit mess is being sorted out in the US.

I agree that Cnooc is a good buy. Only Cnooc-C1 may not be the suitable instrument to play. My hope is that OSK or CIMB will issue Cnooc-C2 later on. That would be a better instrument.

What do you think?

The Rock

xatomic said...

Lee Shau Kee just made a comment that HSI will reach 30k tis year and 33k by spring..

i just dont believe its the demise of the HK market now. Where is all the liquidity gonna go? The reversal has to come once all the dust settles. The rebound will be very strong when it comes.

rask3 said...


For the uninitiated folks, these call warrants have proved to be little better than Nigerian scams, lol. Where are the customer's yachts, investment bankers?


sopskysalat said...

HONG KONG, Nov 22 (Reuters) - Billionaire investor Lee Shau Kee, sometimes nicknamed Hong Kong's Warren Buffett, said he spent more than HK$1 billion ($129 million) in the stock market on Thursday as the first salvo in a HK$10 billion bargain hunt.

"Now is the right time to get back to the stock market and start buying," Lee told a news conference.

The HK$10 billion that Lee is poised to pump into stocks will most likely target his favoured portfolio of 11 companies.

The initial HK$1 billion went into China Life Insurance Co (2628.HK: Quote, Profile, Research), China Merchants Bank (3968.HK: Quote, Profile, Research), oil firm CNOOC Ltd (0883.HK: Quote, Profile, Research), coal producer Shenhua Energy (1088.HK: Quote, Profile, Research) and stockmarket operator Hong Kong Exchanges and Clearing Ltd (0388.HK: Quote, Profile, Research).

But Lee warned investors that although he was being open about his plans, he was not expecting anyone to follow him and he was not promising speculators would profit by doing so.

"Gamblers like to complain if they lose their money," he said, according to Bonnie Ngan, spokeswoman for his firm Henderson Land (0012.HK: Quote, Profile, Research).

Lee said Hong Kong's stock market had fully priced in negative news, such as the fallout from the U.S. subprime crisis, and it was time for investors to hunt for bargains.

He forecast that the benchmark Hang Seng Index (.HSI: Quote, Profile, Research), which closed 2.3 percent down at 26,004.92 on Thursday, would hit 30,000 later this year before climbing to reach 33,000 by Chinese new year, during the first quarter of 2008.

Top Glove's Troubled Acquisition

This has been well documented. The RM1.37bn purchase by Top Glove was completed only on April 4th this year. Secondly, the purchase was co...