LI, Tao @ Hong Kong

A worker at an oil refinery in Shaanxi province. Cnooc has targeted production of between 355 million and 365 million barrels of oil equivalent this year, up 8 to 12 percent from 2010 output. Frederic J. Brown / AFP

4 offshore China projects to come on stream in 2011

Cnooc Ltd, the largest offshore oil and gas producer in China, said Thursday it aims to boost its annual production by as much as 12 percent this year as a number of new projects are scheduled to come on stream.

The energy explorer has targeted production of between 355 million and 365 million barrels of oil equivalent (boe) this year, up 8 to 12 percent from the estimated 327 to 329 million barrels output in 2010, Chief Financial Officer Zhong Hua told a media briefing in Hong Kong Thursday.

Four new offshore China projects are expected to be put into operation in 2011 and two overseas projects – one in the US and the other in Argentina – are also estimated to start production this year, according to the company.

“The target Cnooc set for the year is not very aggressive,” Linus Yip, an analyst with First Shanghai Securities, told China Daily. “Cnooc sped up its overseas acquisition last year aiming for a bigger development outreach. It was one of the best performers among the blue chips as it achieved notable growth last year.”

Cnooc’s 327 to 329 million boe production output in 2010 surged 44 percent from 228 million in the previous year.

The company’s stock climbed almost 70 percent over the past year in the city, beating giants PetroChina and Sinopec, which have risen about 21 percent and 35 percent respectively.

Capital expenditure is expected to rise 55 percent this year to $8.77 billion as the company will strengthen exploration in new areas and frontiers, particularly in deepwater including the South China Sea which Cnooc said is under-explored and has huge potential.

“Deepwater areas will play an important role contributing to our medium and long-term growth,” said Zhong. He added that the company’s capital spending will stay at a high level to support the deepwater exploration in the coming years.

In 2010, Cnooc agreed to pay about $8.4 billion for energy assets in Africa, Latin America and the US to help boost production abroad. There are currently 15 new projects under construction, according to the company.

Zhong said Cnooc will continue to seek reserves growth through both exploration and acquisitions in the future.

He added that overseas fields may account for more than 30 percent of the company’s overall production by 2015, from the current 20 percent, and the explorer’s main assets will still be fields off the coast in the next three to five years.

Yang Hua, vice chairman of Cnooc, said the company will maintain a 6 to 10 percent annual production growth rate for 2011 to 2015, basically unchanged from the target set for the previous five years.

“But the comparison base now has been raised to 327 million boe, from the previous 275 million, which leads to a much higher production growth under the same growth rate,” said Yang.

Although Cnooc initiated a $7.9 billion capital expenditure target for 2010, it only spent $5.64 billion last year according to rough statistics. Yang refused to elaborate on the reason for this.

Shares of Cnooc Thursday slid HK$0.06 or 0.32 percent to close at HK$18.62 in Hong Kong trading, in line with the 0.27 percent loss on the city’s benchmark Hang Seng Index.

China Daily

(HK Edition 01/28/2011 page3)

http://www.chinadaily.com.cn/hkedition/2011-01/28/content_11930233.htm

Top spot given for attitudes to trade, capital movement

Hong Kong has topped the 60 largest economies in the world in terms of globalization, according to a survey released Monday by Ernst & Young and the Economist Intelligence Unit.

The Globalization Index 2010 measures and tracks five broad categories in 60 economies including openness to trade, capital movements, exchange of technology and ideas, movement of labor as well as cultural integration.

It surveys more than 1,000 global senior business executives and a number of high-level experts, and Hong Kong surpassed previous winner Singapore to take top spot this year. Ireland also jumped one place to second position while Singapore took third.

“Hong Kong has overtaken Singapore as the most globalized economy in the world. Two out of the top three economies are from Asia-Pacific, which shows how the region is embracing globalization,” said Agnes Chan, Ernst & Young’s regional managing partner, Hong Kong and Macao.

The mainland climbed one position to 39th in the index, while Taiwan was ranked 12th this time, down from 2009′s 11th. The US stepped down four places to 28th in the survey.

Hong Kong’s openness to trade, capital movement and cultural integration are all ranked the highest around the globe in the index. Chan said the city’s strong trade growth and performance in attracting foreign listings in 2010 helped it to stand out in these sectors.

According to the city’s Census and Statistics Department, for the first 11 months in 2010 as a whole, the city’s total exports were up 23.8 percent compared with the same period in 2009. The value of imported goods has also increased by 26.1 percent.

Hong Kong was also the biggest IPO market in the world in 2010, seeing a 79 percent rise in fund-raising and a 55 percent increase in the number of new listings compared with a year earlier.

Apart from the unique fusion of “east meets west” culture which Hong Kong has long been recognized for, Charles Ng, associate director-general of investment promotion with Invest Hong Kong, said the city has also been a big beneficiary of the “one country, two systems” policy over the past few years.

“After the financial crisis, global economic development has now put its spotlight on emerging economies, while the mainland is now the largest emerging market in the world,” said Ng. “Investors regard Hong Kong as the gateway to enter and invest in the mainland, while mainland enterprises also view the city as a springboard to expand into the international market.”

However, maintaining its number one position is nevertheless a challenge, said the report, since the city’s expenditure on research and development by the private sector has shrunk by 13 percent from 2006 through 2009, which led to a slight decrease in its score for exchange of technology and ideas.

The report also advises the government to improve environment and education systems to attract more professional talent to work in the city.

“At any rate, effective supervision on financial activities is very important and necessary to Hong Kong,” Paul Tang, chief economist with Bank of East Asia told China Daily.

“Hong Kong’s biggest advantage – the open economy – is a double-edged sword, which on one hand makes the city rather attractive to foreign investment but also prone to any global financial jolts,” said Tang.

On January 13, 2011, a monthly economic report released by Bank of China (Hong Kong) said the city’s three advantages have made it able to avoid an Ireland-style crisis – another similarly small and open economy.

Like the US, the report said Ireland’s problems was a property bubble embedded in high growth, high debt and leverage. And once the bubble burst, the economy entered into recession while a bank crisis evolved into a sovereign debt crisis.

Although Hong Kong’s property prices have seen ups and downs during the crisis, strong support from the mainland economy, and the city’s solid banking system have helped Hong Kong’s economy achieve a speedy recovery, according to the report.

China Daily

(HK Edition 01/25/2011 page2)

http://www.chinadaily.com.cn/hkedition/2011-01/25/content_11909272.htm

Shoppers browse items in a shop in Wan Chai. According to figures released Thursday, the city’s underlying inflation rate in December hit 2.8 percent. Ed Jones / AFP

Consumer prices rise 3.1% in Dec, driven by rents and food costs

Hong Kong’s inflation accelerated at its quickest pace in almost two years in December driven by increasing rents and rising food prices.

Figures released by the government Thursday show that the city’s overall consumer prices rose 3.1 percent year-on-year in December, compared with 2.9 percent in November. December’s figures marked the highest level of inflation since February 2009, which also increased 3.1 percent.

Netting out the effects of the government’s one-off relief measures, including electricity subsidies, waivers of property rates and public housing rentals, underlying inflation in December hit 2.8 percent, higher than the 2.6 percent seen in November.

Electricity, gas and water prices surged 13 percent in December, due to the fact some households had already used the subsidy from the government, the Census and Statistics Department said on its website.

Food prices increased 4.3 percent last month while housing prices rose 2.5 percent compared with the same period in 2009. Both expanded faster than the readings of 3.8 percent and 2.1 percent in November.

“Unlike the mainland where food prices are slowing down, Hong Kong’s food prices are now trending upwards at a faster pace due to buoyant demand and a depreciating currency,” said Irina Fan, a senior economist with Hang Seng Bank.

The mainland’s consumer price index rose 4.6 percent in December from a year earlier, compared with 5.1 percent growth in November, the National Bureau of Statistics said Thursday.

Food prices, though surging 7.2 percent year-on-year in December, was the lowest reading since August.

“The (Hong Kong) economy is likely to face higher inflationary pressures in the coming months, due partly to the pick-up in import prices amid rising global food and commodity prices and partly to the gradual building up of domestic price pressures along with the strong pace of economic expansion,” said a government spokesman.

The spokesman added that the Hong Kong government will continue to monitor the inflation situation closely, especially its impact on lower-income people.

Fan said that without some of the government’s one-off measures in the wake of the financial crisis in 2008, Hong Kong’s full-year CPI reading in 2010 would have been at least 1.2 to 1.5 percentage points higher than the 2.4 percent rise that was officially calculated.

In 2009, the city’s inflation only accelerated 0.5 percent compared with 2008 .

Inflationary pressure could worsen notably this year, with headline CPI reaching 5 percent if the government stops offering further one-off measures to help the city’s residents cope with price hikes, Fan said.

She added that the city’s rents are expected to retain their double-digit ascent, while food prices also see no sign of being lowered in the near term, particularly as the lunar new year draws closer.

China Daily

(HK Edition 01/21/2011 page2)

http://www.chinadaily.com.cn/hkedition/2011-01/21/content_11892792.htm

China Timber Resources Group Ltd announced Friday that it is to buy a 66 percent stake in a company building a toll expressway in a coal-producing part of Inner Mongolia for 3 billion yuan.

In a statement to the Hong Kong Stock Exchange, it said it plans to diversify its business. It also said it plans to privately issue 7 billion shares to four investors, including the Li Ka Shing Foundation, at 0.4 yuan a share in order to raise 2.80 billion yuan. The amount issued will account for 29.98 percent of total equity upon completion of the private placement.

Excluding the construction period, the targeted company, namely Inner Mongolia Zhunxing Heavy Haul Expressway Co, has an exclusive right to build and operate China’s first heavy duty expressway designed for coal transportation in the Inner Mongolia Autonomous Region for 30 years, the company wrote in the statement to the city’s bourse.

The 265-kilometer-long toll expressway will connect Jungar Banner and Xinghe County, a major coal production area and logistics hub for coal distribution in northern China, the company added.

The expressway is expected to begin operations in January 2013 and the proposed toll fee for the expressway is 0.15 yuan per ton per kilometer.

China Timber, through its subsidiaries, provides timber logging and trading of timber logs from forest concessions.

The proposed transaction was “in line with the company’s business strategy to consider diversification into a new line of business that has significant growth potential,” Cao Zhong, its chairman said in the statement.

According to its interim report, China Timber recorded a further HK$200 million loss for the six months ended September 30, 2010, compared with a loss of HK$21.1 million during the same period a year earlier.

Shares of the Hong Kong-listed company gained HK$0.025 or 6.76 percent to close at HK$0.395 on the city’s bourse Friday. Trading of shares had been suspended since Wednesday pending the announcement.

“It is a good attempt for China Timber to explore some new channels for a diversified business portfolio,” said Alvin Chung, associate director at Prudential Brokerage. “But its stock, though it has seen a tremendous gain since November, is quite likely to fall back to previous lows later on.”

Between January and October 2010, China Timber’s share price traded mainly in a range between HK$0.10 and HK$0.15. However, since November the stock has surged almost 300 percent.

“Apparently some investors learned about the transaction in advance and pushed the price to its current high,” Chung added.

China Timber will also sell a total of 7 billion new shares to four investors, including Li Ka Shing Foundation Ltd, China Life Trustees Ltd, Lunar International Ltd and CEF Holdings Ltd, for HK$0.40 per subscription share, it said in the same statement.

China Life Trustees is a wholly-owned subsidiary of Singapore-based China Life Insurance (Overseas) Co Ltd, and CEF is jointly owned by Li Ka-shing’s Cheung Kong (Holdings) Ltd and Canadian Imperial Bank of Commerce. Lunar International is wholly-owned by Themes Investment Partners II, LP – a private equity firm based in New York.

China Daily

(HK Edition 01/15/2011 page3)

http://www.chinadaily.com.cn/hkedition/2011-01/15/content_11858547.htm

Rentals for office space in the city are expected to rise by a further 15 to 20 percent this year after rebounding an average of 32 percent last year, as supply remains tight against robust demand amid stable economic growth, property consulting firm DTZ has forecast.

According to data provided by DTZ Tuesday, office rentals last year rebounded strongly from 2009 lows after a slump during the 2008 financial crisis. Grade-A office spaces saw a notable surge in rentals while the vacancy rate shrunk over the past year.

Rentals in the prime Central/Admiralty area surged 29.6 percent to an average HK$105 per square foot during the past year while rentals in sub-markets such as Sheung Wan and Wan Chai/Causeway Bay rose 22 percent and 36.7 percent, respectively, to HK$50 per square foot and HK$41 per square foot by the end of 2010.

Rentals in the Island East and Tsim Sha Tsui areas climbed 32.0 percent and 30.4 percent, respectively, to HK$33 per square foot and HK$30 per square foot by the year end, while Kowloon East recorded the fastest rental hike last year, surging 42.1 percent to HK$27 per square foot from HK$19 per square foot as of the end of 2010.

“By the last quarter of 2010, Island East and Kowloon East had surpassed their respective peak in 2008, and Wan Chai/Causeway Bay, Tsim Sha Tsui and Sheung Wan were getting close,” Mark Price, DTZ’s head of business space for Greater China, said during a press conference Tuesday. However, he noted that the overall rental situation in the Central/Admiralty area is still far below the previous peak.

Against the backdrop of buoyant market outlook and strong demand, Price forecast an upside of 15 to 20 percent this year for office rentals in the Central/Admiralty area and other districts on Hong Kong Island.

As rentals in most districts, except Central/Admiralty, are within 10 percent of their previous peaks, Price expects these districts will surpass their previous peaks in 2011.

“But the same may not apply to the prime Central/Admiralty area, especially its AAA-rated buildings, because of a larger distance from their previous peaks,” Price added.

In the second quarter of 2008, rentals in Central/Admiralty reached an average of HK$122 per square foot, with the AAA-rated office buildings setting a record high of HK$168 per square foot. The previous peaks are still 13.9 percent and 19.1 percent higher compared with the latest levels of HK$105 and HK$136 in 2010.

Even so, the large rental gap between those sub-markets and the prime Central/Admiralty area currently has justified many tenants’ exodus from the central business district (CBD) for the purposes of saving some money, according to Price. The increase in choice of locations in non-core districts, improved infrastructure and better office facilities have also supported decentralization for tenants who were resistant to rocketing CBD rentals.

Except for Island East, most districts have also shrunk their vacancy rate compared with a year ago, according to Alva To, DTZ’s head of consulting for Greater China. The overall office vacancy rate declined 3.2 percent to an average of 5.0 percent at end-2010 from the fourth quarter of 2009.

To said the rise in the vacancy rate in Island East was mainly due to the launch of new supply in the fourth quarter which pushed the district’s vacancy rate up 2 percentage points year-on-year to 7 percent from 2009.

He added that Island East, in fact, saw an impressive four-fold increase in take-up last quarter, as more new supply came to the market.

“But the overall 5.0 percent vacancy rate as of the fourth quarter is still higher than the 3.5 percent during the peak in 2008. The relatively higher vacancy in Island East, Tsimshatsui and Kowloon East, which are all above 5 percent, means more choices for location for occupiers,” said To.

China Daily

(HK Edition 01/12/2011 page2)

http://www.chinadaily.com.cn/hkedition/2011-01/12/content_11830894.htm