Cnooc Ltd. (883) led a rally in Chinese oil producers in New York trading, fueling the biggest premiums in a month over their Hong Kong-listed shares, after the government raised the threshold of a windfall tax on crude.
The Bloomberg China-US 55 Index (CH55BN) advanced 2.3 percent to a four-week high of 99.96 as trading closed in New York. Cnooc surged 6.9 percent, the most among stocks in the measure, followed by PetroChina Co. (PTR) and China Petroleum & Chemical Corp. (600028) The companies’ U.S.-listed stocks are trading at premiums of as much as 4.4 percent over their shares traded in Hong Kong.
China’s finance ministry increased the threshold of the nation’s oil windfall tax to $55 per barrel from $40, effective Nov. 1, 2011, Sinopec said yesterday in a regulatory filing. The action is the central government stepping in to offset the additional resources tax on crude oil sales by provincial governments in November, according to Gordon Kwan, head of regional energy research at Mirae Asset Securities HK Ltd.
“The corporate sector in much of the emerging world actually is in pretty decent shape,” Philip Poole, head of investment strategy at HSBC Global Asset Management, said in an interview with Bloomberg Television in Hong Kong. “For investors who can take a two-year horizon or longer, we think the entry points in China, places like Russia in the emerging equity markets are very interesting.”
Cnooc’s American depositary receipts, each representing 100 common shares, surged to a one-month high of $196.44. They are trading at a 4.2 percent premium over Hong Kong-listed shares, which closed at HK$14.64 yesterday, or $1.89 per share. The gap was the most since Nov. 30.
China’s imports of crude may accelerate to a record this year as the world’s second-biggest oil user bolsters emergency stockpiles and expands refining capacity even as the pace of economic growth slows. The nation may buy 9 percent more petroleum from overseas in 2012, according to the median estimate of seven traders and analysts surveyed by Bloomberg News. Purchases rose 6.1 percent in the first 11 months of 2011.
The increase to the windfall tax threshold is “good” for the major oil companies, as “anyone operating in China has to pay this tax. This will encourage more offshore China exploration as well as onshore,” Kwan at Mirae Asset said. “The shares of Chinese oil companies should outperform” in the trading session following the news, he said.
Many analysts lowered their earnings estimates for the oil companies in November when the provincial tax was implemented, according to Kwan. These forecasts may now be revised back up to pre-November levels, he said.
PetroChina, the nation’s biggest oil producer, leaped 5.9 percent, the most since May 2010, to $139.62. It traded at a 4.4 percent premium over its stock traded in Hong Kong. China Petroleum, the second-largest and the biggest oil refiner in the country known as Sinopec, jumped 5.1 percent to $115.50, the highest level since February 2008.
The Shanghai Composite Index (SHCOMP) slid 1 percent to 2,148.45. The Standard & Poor’s 500 Index added 0.3 percent to 1,281.06. The Shanghai measure is trading at an estimated price-earnings ratio of 8.7 times. That compares with 13.8 for Indian stocks, 9.2 for Brazilian shares and 5.4 for Russian equities.
7 Days Group Holdings Ltd. (SVN), the second-largest budget hotel operator in China, advanced 5.7 percent to $12.16, the most in a month. The company completed its acquisition of Hunan Huatian Star Hotel Management Ltd., adding 21 leased-and-operated hotels across 12 cities in China, it said in a regulatory filing Jan. 3. The added business will be reflected in 7 Days’ financial reporting starting from Dec. 31, 2011, it said.
The ishares FTSE China 25 Index (SPX) Fund, the biggest Chinese exchange-traded fund in the U.S., rose 0.7 percent to $35.69. The Chinese yuan weakened 0.1 percent to 6.3017 per dollar, according to the China Foreign Exchange Trade System.
Youku Inc. (YOKU), the owner of China’s biggest online-video website, gained 4.3 percent to $16.49. Alicia Yap, a Hong Kong- based equity analyst at Barclays, maintained an “overweight” rating on Youku and a 12-month price target of $25 in a note dated Jan. 4.
Chinese companies’ “TV advertising budgets are shifting to online video advertising with Youku, the market leader, appearing well positioned to benefit from the opportunity,” Yap wrote.
Qihoo 360 Technology Co Ltd. (QIHU), a security software developer, rebounded from a record low after saying it will repurchase as much as $50 million of its ADRs, using its cash. The company had $319 million in cash and cash equivalents on its balance sheet as of Sept. 30, 2011, it said in a statement yesterday. The ADRs rose 3.8 percent to $14.51, after sinking to a record low of $13.98 a day earlier.
George I Askew, an analyst at Stifel Nicolaus & Co. Inc., reiterated a “buy” recommendation on Qihoo yesterday, cutting the price target to $31 from $38. Seven of eight analysts rated the stock a “buy” while one gave it a “hold,” according to data compiled by Bloomberg.
China, the world’s second-largest economy, expanded 9.1 percent in the third quarter from a year earlier, down from 9.5 percent growth in the second quarter. Consumer prices rose 4.2 percent in November from a year ago, the slowest pace in 14 months.
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