Wall Street's overnight gains lifted Hong Kong's benchmark index higher for the third straight session on Friday, led by Ping An Insurance and property developers as investors are becoming more optimistic about the global economic outlook.

The blue-chip Hang Seng Index rose 102.58 points, or 0.5%, to 20,971.50 after earlier rising to a high of 21,028.66. For the week, the index was up 1.8%. Market volume on Friday totaled HK$72.65 billion, up from HK$66.13 billion Thursday.

Investor interest in Hong Kong was boosted by Wall Street's gains Thursday because of an unexpected increase in U.S. pending-home sales, with the Dow Jones Industrial Average advancing 0.5% to mark its third day of consecutive gains.

However, traders said that while the city's benchmark index could edge higher in the coming sessions, investors are staying cautious ahead of the U.S. non-farm payrolls report for August due later Friday. The data will likely affect the local index's performance next week, they said, adding they expect the index to trade in a range of 20,500-21,500 points in the coming sessions.

'The index has risen above a major technical resistance level of 20,900, which is a positive signal for the market,' said Linus Yip, a strategist at First Shanghai Securities. However, Yip said it is still too early to say whether there will be a sustainable rebound in the index due to a lack of catalysts to propel more substantial gains.

Property developers rose on the positive U.S. data, with Sino Land gaining 3.2% to HK$14.05, Wharf Holdings rising 2.0% to HK$43.15 and Henderson Land adding 1.1% to HK$47.65.

China's second-largest insurer by market capitalization, Ping An Insurance, jumped 5.4% to HK$69.70 on its second day of trading resumption after it announced a long-awaited move to take control of Shenzhen Development Bank.

The gains came despite private-equity firm TPG's decision to sell its remaining stake in the insurer for HK$65.30 a share, raising US$1.16 billion, a person familiar with the situation said Friday.

'We expect the merger between Ping An's banking division and Shenzhen Development Bank to bring synergies to the insurer, helping it to expand into a broader range of financial services,' said Patrick Pun, head of the China division at Taifook Securities.

He also said TPG's disposal of its remaining stake in Ping An Insurance could also remove an overhang on the insurer's share prices.

Bucking the gains, retailer Esprit, which derives the bulk of its earnings from Europe, became the worst performing blue-chip Friday, with its shares falling 5.4% to HK$40.60, after it posted weaker-than-expected earnings for the last fiscal year and said its outlook was challenging. Friday's decline added to a 3.1% post-results selloff on Thursday.

Hong Kong shares ended lower on profit-taking Wednesday after a five-day winning streak and because of a sharp decline in China Mobile following Vodafone's sale of its stake in the index heavyweight.

The blue-chip Hang Seng Index fell 312.93 points, or 1.5%, to 21,088.86 after trading between 21,066.69 and 21,214.81.

Market volume totaled HK$118.81 billion, up sharply from HK$58.21 billion Tuesday because of active trading in China Mobile after Vodafone's stake sale.

The Hang Seng Index also succumbed to profit-taking after a 4.2% rise in the previous five sessions.

'Overall sentiment remains positive, as we can see the fall is modest compared with the index's recent gains,' said Alvin Cheung, an associate director at Prudential. He said the index could reach 21,800-22,000 by the end of September.

China Mobile sank 3.8% to HK$78.90 after Vodafone sold its 3.2% stake in the mobile operator at HK$79.20 a share, at the bottom of the indicative HK$79.20-HK$80.00-per-share range, according to a person familiar with the situation.

Goldman Sachs said in a report: 'We do not expect meaningful fundamental impact from the stake transfer, given the shares are secondary and Vodafone's operational influence has historically been limited by the small size of the stake.'

It said the stake sale may also have removed an overhang on the stock.

Fellow heavyweight HSBC also dragged the benchmark index lower. It dropped 1.3% to HK$78.20 because of renewed concerns over the financial health of European banks after questions emerged over recent stress tests on the lenders.

Investors were neutral on the news of HSBC Chairman Stephen Green's departure to become the U.K.'s trade minister, traders said. Wing Fung Financial's head of research, Mark To, said the market had speculated about Green's resignation for some time.

'A management change doesn't have a direct impact on the shares, only the earnings outlook does,' To said.

Conglomerate Swire Pacific didn't fall as much as the broader market, dropping 0.6% to HK$97.90, after it said it agreed to sell its holdings in two beverage-can joint ventures to its partner in the ventures, Crown Holdings, for a total of US$150 million.

Hi there,

Thanks. I am a complete novice in forex trading, but trade on coomon stocks in various markets across the globe.
I have been concentrating for a while now in Hong Kong but will soon write randomly on a basket of other markets for the info of the good audience.

Italian job: How Eni could take Uganda's oil fields

Posted Monday, September 13 2010 at 17:25
from the East African weekly newspaper



A combination of raw nature and pure economics has forced Uganda to climb down from its high pedestal over the production phase of its oil programme.

The country last week announced that it had began talks with Kenya and UK firm ESSAR over the possible joint development of a refinery for Ugandan crude at Mombasa.

While having a refinery in Uganda was always a key political and economic goal of President Museveni’s administration, the government has had to back down after it emerged that it was a high risk venture.

Economics aside, a major obstacle to a Uganda-based refinery lies in the physical properties of the crude that has been discovered.

While it is low in sulphur content, which is considered a good thing; it is 30 per cent parrafin wax.

Besides turning it solid at surface temperatures, this aspect of Uganda crude, according to industry experts would require it to be blended with other crudes to improve its yield of gasoline grade fuel.

Higher cost

This would require a logistical chain for importing those additives which would significantly push up the cost of Ugandan fuel.

With competing refineries in Dar es Salaam and Mombasa refining cheaper imported crude, politically, the Ugandan government would have to live with the unpalatable reality of selling more expensive petroleum products from a domestic source, observed one commentator.

The products would also be unmarketable to the regional market because imported oils from the Middle East would still be cheaper.

There is also the issue is scale. Current daily demand for fuel oil in East Africa stands at 50,000 barrels, just 10 per cent of what Uganda would be pumping out of the holes at peak production, not sufficient for the oil companies to recover their costs if they refined in Uganda.


Italian oil firm, Eni, is back in contention in the hunt for oil in Uganda.
This follows the expiration of the exploration license to the prized block 3a last week.

If indeed Eni does bid for a licence, it will make a significant shift in the hunt for more oil reserves in Uganda that could see the game shifting from small, specialty oil prospecting firms from Canada to mainstream oil majors.

This could see significant foreign investment flows going into Uganda’s emergent petroleum economy.

The small players like Heritage and Tullow play a big role in finding vast oil reserves in difficult places and then flip over their production licences to big oil firms who have access to huge capital outlays that are needed to bring oil to market.

It is this reality that is driving the sands to shift in the murky game that Uganda’s oil production programme has become as the original players who found the oil-- face off with new competitors for oil licences. Some have been pushing hard to get a good bargain out of their licenses.

After seemingly losing out after the Irish firm Tullow Oil exercised its pre-emptive rights in the acquisition of Heritage Oil’s fields in Uganda, the Italians are back in the game. The licences that were due for renewal expired at midnight on September 7, effectively throwing the incumbents out.

On the stroke of September 8, Energy Minister Hillary Onek wrote to Heritage and Tullow informing them of the expiry of the licence.

“You are therefore requested to ensure that all the restoration work detailed in the Environmental Impact Assessment for the respective activities undertaken during the tenure of the Exploration Licence is undertaken as required,” Onek said in his letter.

The event which freed the fields that are host to the proven 200 million barrels Kingfisher well was apparently one of the aces in the Ugandan government’s cards in its ongoing wrangle with oil explorers over unpaid tax dues.

The Uganda government which is still recovering from the public anger it faced after it lost out of $287 million in tax revenues to prospector Heritage Oil, is now determined not to miss out on the capital gains tax in future deals.

Technically, the fields are on the market once again and although Tullow have been told they would be considered favourably in the new round of bidding, the circumstances are different now.

First the price of the fields has gone up considerably since they are now a known find and Tullow would need to match possible steep offers from industry giants such as Eni and even erstwhile partners total and the China National Offshore Oil Company CNOOC

Although the proven Kingfisher well with a flow rate of 14,000 barrels per day has tended to dominate any discussion of Uganda’s oil fields, industry experts say the real target for anybody waiting in the wings is Pelican, a huge prospect to the South that some observers believe will even turn out bigger than Kingfisher.

It is with this knowledge in mind that Tullow’s courters have suddenly dropped it like a leper.

According to the oil exploration and production sharing agreements Uganda signed with the oil prospectors, once a find is announced, the oil firm has up to two years to file a development plan and apply for a production licence.

While heritage which made the kingfisher discovery in 2007 did not seek the necessary permits because it planned to cash in on its fortune and exit Uganda; Tullow got so taken up by efforts to enforce its preemptive rights that it forgot to fulfil this small but critical formality.

While the Italians who initially courted both Tullow and Heritage had receded into the background after their proposed buyout of heritage was scuttled by Tullow¹s preemptive rights, they have recently bounced back.

The EastAfrican has learnt that Eni has renewed contracts with its local suppliers for another six months, suggesting that they have not given up on Uganda yet.

According to oil industry sources, Eni which has so far spent $15 million on its Uganda programme has opted to play a waiting game.

This is the first time the company is spending so much money on a programme in a country before it has secured any tangible assurances that they will get a production licence.

The Italians apparently have the upper hand however, because they are the only company to have put together a basin-wide development plan and feasibility studies.

This, coupled with Eni track record and financial resources are considered to be strong selling points to Uganda which is eager to bring its fields into the production phase.

Hong Kong shares ended higher Monday after China's inflation data for August were in line with economists' expectations, easing concerns over a hike in the country's interest rates in the near term, with Cnooc leading the gains on a rise in crude oil prices.

The blue-chip Hang Seng Index rose 400.96 points, or 1.9%, to 21,658.35 after trading between 21,395.57 and 21,714.36 during the session.

Market volume totaled HK$80.05 billion, up from HK$65.95 billion Friday.

Data issued Saturday showed China's consumer price index rose 3.5% in August from a year earlier, the fastest rate in nearly two years, but the rise was mainly due to abnormal weather conditions and it matched the median 3.5% forecast of 14 economists. Inflation pressures will likely ease in coming months, economists said.