China Goes On Another Shopping Spree
The Chinese are coming! Investors be aware. Look out for a new bout of Chinese acquisitions, mergers and stock buys in coming months.
We’re getting bullish signals from a number of sources. Xiong Weiping, chairman of Aluminum Corp. of China, the nation’s biggest producer of the aluminum says Chinese companies will step up the pace of overseas mergers and acquisitions in a “new wave” of deals.
The Chalco chairman says Chinese companies will participate in a new wave of mergers and acquisitions in the mining sector with the end of the financial crisis.
Last June, China Petrochemical Corp., the country’s second-biggest oil company, bought Addax Petroleum Corp. for $7.8 billion, giving China a second major stake in Canada’s oil sands.
China’s foreign resource-buying appetite had been chilled by the breakdown of a $19 billion deal to buy a portion of Rio Tinto which has huge iron ore mining operations in Australia. That deal ended with China accusing some Rio executives of espionage.
Chalco’s chairman acknowledges that China lacks experience in foreign mergers and acquisitions. Back in 2005, another Chinese company was rebuffed by political backlash as it tried to buy Unocal in the United States. China has also faced political backlash in Australia but none so far in Canada.
Canada may rank high among resource-buying targets for the Chinese. China Petroleum & Chemical Corp.‘s finance subsidiary said it held talks with Macquarie Group Ltd.’s Canadian unit as part of efforts to raise funds for the refiner’s expansion. China Petroleum is the state parent of Sinopec. The previous Canadian tar sands purchase benefitted PetroChina.
Chinese authorities acknowledge that their purchases could raise resource prices. The stocks of companies who sell resources, particularly Canadian and Australian resources firms may feel a boost in share prices as a result of China’s insatiable appetite.
While China’s colossal state-run resource consumers embark on another buying spree, Beijing’s sovereign wealth fund is also shopping for shares.
China Investment Corporation (CIC), the nation’s sovereign wealth fund, is in a series of talks with foreign resource firms with a view to possible investments. The $200 billion fund holds a portion of China’s $2 trillion in foreign reserves, making it a cash-rich consumer.
The CIC fund is also is eyeing investment opportunities in infrastructure, green energy and other forms of innovative energy transmission.
Committed to Your Profits in China,
Jim Trippon
Editor-in-Chief
China Stock Digest
