PetroChina Gains on Fuel Pricing Changes: China Overnight

PetroChina Co. drove gains among Chinese equities in New York on prospects changes to the pricing of retail fuel will benefit oil refiners. Cnooc Ltd. jumped after at least five analysts upgraded the stock.

The Bloomberg China-US Equity Index of the most-traded Chinese companies in the U.S. rose 0.6 percent to a two-week high of 92.66 yesterday. Cnooc, China’s biggest offshore oil explorer, surged to the highest level this month, while PetroChina, the second-largest refiner, traded at the widest premium over its Hong Kong stock in three weeks. LDK Solar Co. sank after selling additional shares to an investor for 30 percent less than a month ago.

American depositary receipts of No. 1 refiner China Petroleum and Chemical Corp. also rallied as the nation announced changes to the mechanism for setting fuel prices that Sanford C. Bernstein & Co. said may reduce processing losses for oil companies. China is the world’s second-biggest crude consumer. Cnooc was raised to the equivalent of buy by four securities firms including Mirae Asset Securities Hong Kong Ltd. and Bank of China (Hong Kong) Ltd. after the company said that it will boost production in the next two years.

“Slowly the pricing mechanism is moving to be more responsive to the changing international oil price,” Charlie Awdry, a portfolio manager for Henderson Global Investors Ltd.’s 500 million-pound ($758 million) China Opportunities Fund, said by e-mail from London. “The price changes appear to be occurring in a more timely fashion, which benefits refiners.”

ETF Advances

The iShares FTSE China 25 Index Fund, the largest Chinese exchange-traded fund in the U.S., rallied 1.3 percent to $37.31 in New York, the highest close since March 15. The Standard & Poor’s 500 Index climbed 0.8 percent to 1,563.77, the highest level since October 2007.

ADRs of PetroChina, the nation’s biggest oil and natural gas producer and also a refiner, advanced 1.3 percent to $132.13, after dropping the previous three days. The ADRs, each representing 100 underlying shares, traded 0.7 percent above its Hong Kong shares, the biggest premium since March 5.

China Petroleum, known as Sinopec, added 1.3 percent in a third day of gains to $116.54, the highest level since Feb. 1.

Price adjustments in retail fuel prices in China will be based on the 10-day moving average cost of a basket of crudes, down from 22 days previously, and the threshhold for triggering a revision will be abolished, the National Development and Reform Commission said in a statement on its website yesterday. The changes started immediately, it said. The NDRC also cut gasoline and diesel prices for the first time in four months, effective today.

‘Increase Transparency’

The new mechanism “has finally been passed and it helps increase transparency in the sector,” Sam Mahtani, who oversees about $5 billion as director of emerging markets at F&C Asset Management Plc, said by e-mail from London yesterday.

Cnooc’s ADRs surged 2.5 percent to $194.64, the highest close since Feb. 28.

Current spending at Hong Kong-based Cnooc, which completed the acquisition of Canada’s Nexen Inc. in February, will help it reach its annual output growth target of 6 percent to 10 percent through 2015, Chief Financial Officer Zhong Hua said at a press conference in Hong Kong March 22.

The company also said its board proposed a 2012 year-end dividend of HK$0.32 per share, up from HK$0.28 paid a year ago. The dividend is a “bright spot,” showing the company is confident over funding, Barclays Plc analysts led by Scott Darling wrote in a note March 25. Barclays reiterated its recommendation of overweight, equivalent to buy. Four other analysts raised their ratings to buy, and Jefferies Group LLC lifted its to hold from sell.

LDK Drops

Cnooc will release a plan to integrate Nexen results in the second half of this year, CFO Zhong said March 22. Nexen added 20 percent to Cnooc’s production and 30 percent to its reserves, Chief Executive Officer Li Fanrong said Feb. 27 as the deal was completed.

LDK, the biggest maker of wafers for solar cells after GCL-Poly Energy Holdings Ltd., sold 12 million shares for $1.28 each to Fulai Investments Ltd., it said yesterday. That was about 30 percent less than the $1.83 apiece Fulai paid for 5 million shares of LDK last month.

The company, based in Xinyu, dropped 3.5 percent to $1.13 in New York trading, the lowest close since Dec. 11.

China Eastern Airlines Corp. the second-largest carrier in China, dropped 2.2 percent to $21.39 in New York, the lowest level in more than a week.

Airline Income

The Shanghai-based company said yesterday net income in 2012 fell 30 percent to 2.95 billion yuan ($470 million), missing the 3.2 billion yuan average projection of 13 analysts, according to data compiled by Bloomberg. Sales for the year climbed to 85.6 billion yuan from 84 billion yuan a year ago.

Hong Kong’s Hang Seng China Enterprises Index slid 0.5 percent to 10,925.13 yesterday, the biggest slump in a week. The Shanghai Composite Index of domestic Chinese shares lost 1.2 percent in a second day of declines to 2,297.67.

Twelve-month non-deliverable forwards on the yuan strengthened for a fifth day, adding 0.07 percent to 6.2990 per dollar in New York, the highest level since Jan. 24, data compile by Bloomberg show. The currency was little changed at 6.2110 per dollar in Shanghai yesterday, according to the China Foreign Exchange Trade system.

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