Bloomberg News

Cnooc Up After Sales Gain as PetroChina Jumps: China Overnight

November 02, 2011

Oct. 27 (Bloomberg) -- Chinese oil companies rose to their highest levels in at least three weeks before earnings reports, leading gains in the Bloomberg China-US 55 Index, as investors turned to riskier assets after European leaders reached an agreement on recapitalizing banks.

PetroChina Co., the nation’s biggest oil producer, soared 4.5 percent, the most in five months, before its third-quarter report in Hong Kong today. Cnooc Ltd., the nation’s biggest offshore oil explorer, jumped 4.6 percent to a seven-week high after saying quarterly sales increased from a year earlier. China Petroleum & Chemical Corp., Asia’s biggest refiner, may report today that net income rose 6 percent to 20.8 billion yuan ($3.3 billion) in the three months ended Sept. 30, according to the mean estimate of six analysts surveyed by Bloomberg.

Oil stocks rallied even as crude retreated in New York. European leaders said in a statement that they reached an agreement on a plan to add capital to banks at a summit in Brussels, helping trigger a rally in U.S. stocks.

“Investors tend to buy commodities, including gold, and stocks when the perceived risks are relatively lower,” said Richard Kang, chief investment officer at Emerging Global Advisors in New York, which manages an exchange-traded fund focused on developing-market energy companies. “Emerging-market oil companies have showed high correlations with the broad stock indexes in the U.S. or globally this month as optimism over Europe’s debt crisis has increased.”

Quarterly Earnings

The Bloomberg benchmark of the most-traded Chinese equities in the U.S. advanced 3.1 percent to a one-month high. The ishares FTSE China 25 Index Fund, the biggest Chinese exchange- traded fund in the U.S., leaped 4 percent to $36.13 in New York, the strongest level since Sept. 16. The Shanghai Composite Index added 0.7 percent yesterday in its third day of gains.

China’s oil producers have rebounded as much as 19 percent over the past month as oil prices surged 20 percent after dropping to the lowest in more than a year on Oct. 4. Cnooc’s revenue, which came almost all from oil and gas production, rose 24 percent in the third quarter to 46.3 billion yuan as higher crude prices countered a drop in output, according to the company’s statement to the Hong Kong Stock Exchange yesterday. PetroChina third-quarter net income may drop 4 percent to 33.3 billion yuan on refining losses, according to median estimate of six analysts surveyed by Bloomberg News.

Slowdown

China’s economy, the world’s second largest, expanded 9.1 percent in the third quarter from a year earlier, the least in two years. The Chinese yuan strengthened 0.1 percent yesterday to 6.3533 per dollar in Shanghai, adding its gains this year to 4 percent, according to the China Foreign Exchange Trade System.

The Standard & Poor’s 500 Index climbed 1.1 percent and the euro erased losses in New York after a report said French President Nicolas Sarkozy and German Chancellor Angela Merkel want to meet Greek creditors in Brussels to break a deadlock of the terms of a debt writedown, said a person familiar with the matter.

Cnooc’s American depositary receipts rose to $187.62 in New York. Each ADR represent 100 common shares. Its Hong Kong-traded shares added 0.8 percent to HK$14.54, or the equivalent of $1.87. The ADRs of Aluminum Corp. of China Ltd., a unit of the nation’s biggest maker of the lightweight metal also known as Chalco, added 3.6 percent to $13.04. Yanzhou Coal Mining Co., China’s fourth-largest producer, surged 5 percent to $24.29 in U.S. trading.

Internet Shares

Internet companies dropped, led by Sina Corp. and Youku.com Inc. Sina’s shares sank 4.6 percent to $84.68 after China’s ruling Communist Party pledged to strengthen management of online social media sites. The stock tumbled as much as 10 percent. Youku sank 6 percent to a one-week low of $19.64.

The party’s central Committee said it will supervise the world’s biggest online community more closely, promote “constructive” websites and punish the spread of “harmful information,” according to a communique from its Oct. 15-18 meeting released overnight by the official Xinhua News Agency.

Crude futures for November delivery retreated 3.2 percent to $90.20 a barrel on the New York Mercantile Exchange, after a report showed a larger-than-projected gain in U.S. stockpiles. The decline trimmed its gains this month to 15 percent.

Aluminum for three-month delivery dipped 0.4 percent on the London Metal Exchange, and prices of coal lost 0.5 percent to $72.92 a ton on the New York Mercantile Exchange.

The Shanghai Composite Index has plunged 14 percent this year, compared with an 18 percent drop in Brazil’s Bovespa Index, 11 percent loss in Russia’s Micex Index, and a slump of 16 percent in India’s benchmark measure. The Shanghai measure is trading at 12.9 times earnings, compared with 15.4 for Indian stocks, 8.8 for Brazilian shares, and 5.6 for Russian equities.

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--Editors: Marie-France Han, Joshua Fellman

To contact the reporter on this story: Belinda Cao in New York at lcao4@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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