Business Global Scene

India’s trade deficit widens on oil imports

India’s trade deficit widened to 5.01 billion in July from four billion dollars in the same month last year as imports jumped, official data showed on Monday.

Imports in July 2007 rose 20.4 percent to 17.5 billion dollars while exports gained 18.5 percent to 12.5 billion dollars, India’s trade ministry said.

Higher global oil prices and imports to meet demand in the fast-growing economy spurred the trade gap, according to the data.

Non-oil imports jum- ped 25.9 per cent to 12.5 billion dollars in July while oil imports rose 8.75 percent to 5.04 billion dollars, according to the data.

In the first four months of India’s financial year — April to July — non-oil imports rose 44 percent to 52.5 billion dollars and oil imports rose 5.3 percent to 19.8 billion dollars, according to the data.

For the four month period, exports rose 18.2 percent to 46.8 billion dollars while imports gained 30.7 percent to 72.4 billion dollars for a cumulative trade deficit of 25.6 billion dollars from 15.84 billion dollars in the same period a year ago, according to the data.

Suez, GDF merge to create new European energy giant

French energy group Suez and state-owned Gaz de France announced their long-awaited merger on Monday, creating the world’s fourth biggest energy company by market capitalisation.

The French state will retain 40 percent of the new GDF-Suez, Prime Minister Francois Fillon said, highlighting that this meant the government would direct the new 90-billion-euro (123-billion-dollar) entity.

“We have the control, we will keep hold of the strategy,” Fillon said.

GDF-Suez will give France two of the biggest four energy companies in the world, with the new company coming behind Russia’s Gazprom, Electricite de France and Germany’s EON, the two companies said in a statement.

The boards of the two groups approved the merger on Sunday, finalising intense negotiations that began in February 2006 and had to overcome union hostility to a reduction of the state’s 80.2-percent holding in GDF.

The prime minister said the government had sought but could not find “other solutions” to ensure that GDF remained a “major actor” in the energy industry.

Fillon said that waiting for GDF to become “isolated” would have allowed “foreign actors to get a foothold in the French market.”

The proposed merger was widely seen as a protectionist move to protect Suez when it was revealed by the former French government led by Prime Minister Dominique de Villepin.

Suez had become a takeover target for Italian group Enel. Reaching the agreement announced on Monday took 18 months of negotiations, requiring solutions to a series of political and financial problems.

An increasing discrepancy between the two companies’ market valuation was a sticking point that had dogged the talks, requiring the intervention of President Nicolas Sarkozy. Suez shares have risen faster than GDF’s over the past 18 months, meaning that a merger on the initially agreed terms would leave Suez shareholders short-changed.

AFP

Shell signs deal to sell Gorgon LNG to PetroChina

Royal Dutch Shell Plc said on Tuesday it had agreed to supply PetroChina Co with liquefied natural gas from the Gorgon project off the coast of Western Australia.

Shell said in a statement it would sell 1 million tonnes of LNG a year to PetroChina, the world’s No.2 oil and gas producer, under the 20-year contract. The two companies will work to conclude a detailed agreement before December 2008.

The agreement suggests the project, which has an estimated gas reserve of about 40 trillion cubic feet — a quarter of Australia’s known gas reserves, is likely to go ahead despite speculation it might be shelved due to soaring construction costs.

Some of those cost increases have been due to environmental concerns and conditions imposed on the project by the Western Australian state government.

Chevron has said that it was working with the state government on the details. It would need to seek Australian national government approval before making a final investment decision. U.S. energy major Chevron , the operator of the project, holds a 50 percent stake while Exxon Mobil and Shell each have 25 percent.

The Gorgon partners plan to build a processing plant for the project’s gas on Barrow Island in Western Australia that would have a total liquefaction capacity of 10 million tonnes a year.

Industry analysts have suggested Chevron and its partners will increase the scale of the project to build two LNG trains with up to 7.5 million tonnes capacity each — pushing up construction costs to about A$20 billion ($16.4 billion) from an estimated A$11 billion three years ago.

Consumers key to reliance on Western markets: WEF

China’s booming export-driven economy remains vulnerable to any changes in Western consumption patterns but its burgeoning domestic market could lessen this risk, the World Economic Forum said on Monday.

China’s retail sector is currently growing at a rate of 13 percent and investors are increasingly focusing on the Asian giant as a source of consumers and not just simply cheap labour, the WEF said in a report on the risks to the global economy.

The report comes ahead of a WEF-sponsored meeting in Dalian, China from September 6-8, called the “Inaugural Annual Meeting of New Champions” and featuring over 1,700 Chinese and Western participants.

The world’s economy in general remains dependent on its biggest single market, the United States, where consumption has grown by 3.5 percent per year since 1998, it said.

“It is easy to see why many observers fear the dependency on a single source of demand,” the report said, especially given the recent fears of a credit crunch sparked by problems in the US housing market.

US consumption has been funded by debt — both by consumers borrowing against high house prices, and Asian and oil-exporting countries investing in US Treasury bills, the report noted. China’s abundance of cheap labour has been put to work making goods for export to the US and other Western countries.

AFP

China oil refiners not asking to raise prices-NDRC

Sinopec Corp and CNPC’s PetroChina have not asked the Chinese government to raise the price of oil products to reflect the increased cost of crude oil on global markets, a senior official said on Tuesday.

Bi Jingquan, vice chairman of the National Development and Reform Commission, said the oil refiners had been profitable in recent months, suggesting it was not urgent to raise oil product prices in the domestic market.

“So far, we haven’t received any application from Sinopec and CNPC to raise finished oil product prices because of rising international crude oil prices,” he told a news conference. But Bi did not rule out possible increases, saying China would continue to reform the pricing system for oil products.

“China’s crude prices have been linked to international markets, and we will reform finished oil prices (at home) based upon it — that’s the set direction,” Bi said.

“But as for the detailed price adjustment timing, we will decide to take full account of international oil prices and affordability from all social aspects,” the planning official said.

He said overall oil demand and supply in China was “balanced” and the market was stable.

Reuters

China COSCO to buy $4.6 billion dry bulk shipping assets

China COSCO Holdings Co Ltd.said on Tuesday it would buy dry bulk shipping operating assets from its controlling shareholder, China Ocean Shipping (Group) Co, for 34.61 billion yuan (US$4.59 billion).

The Hong Kong-listed container shipping concern said the deals would be funded by proceeds from an A-share issue, bank borrowing and internal resources.

China COSCO said it would buy the entire marine dry bulk shipping firm COSCO Bulk Carrier Co Ltd, the marine cargo shipping firm Qingdao Ocean Shipping Co (COSCO Qingdao), and a 41.52 percent stake in marine dry bulk shipping and freight forwarding firm Shenzhen Ocean Shipping Co (COSCO Shenzhen) for 15.98 billion yuan.

The company said it would buy another 6.35 percent stake in COSCO Shenzhen from Guangzhou Ocean Shipping Co, a unit of its controlling shareholder, for 125.28 million yuan.

China COSCO also said its COSCO Pacific Investment unit would buy the entire Golden View Investment Ltd from COSCO (Hong Kong) Group, a unit of its controlling shareholder, for 18.50 billion yuan.

Golden View holds the entire marine dry bulk shipping firm COSCO (Hong Kong) Shipping Co Ltd.

In a filing with the Shanghai Stock Exchange, China COSCO said it planned to issue up to 1.3 billion local currency A shares in a private placement worth more than $3 billion for major acquisitions.

The shares were planned to be sold to its parent and 9 other institutional investors at prices of 18.49 yuan each or more, raising more than 24 billion yuan ($3 billion), the listed flagship of China’s premier shipping conglomerate said.

Reuters

Japan, Chile enter free trade pact

Japan and Chile on Monday entered a free trade agreement, Tokyo’s first with a South American nation which will provide the Asian economic power with a steady supply of minerals.

Japanese Prime Minister Shinzo Abe ceremonially launched the deal with visiting Chilean President Michelle Bachelet. The two leaders also pledged cooperation in the fight against global warming.

The agreement “is very important for Chile because Japan is the second economic power in the world,” Bachelet told a joint news conference with Abe. Chile “is a serious and stable country and will be a gateway for Japan into the rest of Latin America,” she said.

Japan has been steadily seeking free-trade deals amid the collapse of global trade talks. Japan has reached framework deals with eight nations. Its agreement with Chile is the fourth to go into effect.

Japan quickly sealed the deal with Chile, which had already signed a free trade agreement with China in 2005.

According to the Chilean central bank’s 2006 trade figures, exports to Japan — chiefly copper — reached six billion dollars, while imports stood at 1.06 billion.

Under the deal, Santiago will immediately lift its six percent tariff on Japanese cars and also remove duties on machinery, electronic equipment and products such as Japanese green tea and sake rice liquor.

Bachelet said the agreement “will increase exports to Japan and create at least 50,000 new jobs in the northern region” of Chile, while benefitting the fishing industry in the south of her country.

“What also interests us greatly is that Chilean businessmen know Japan better and the opportunities it offers,” she said.

Tokyo in turn will gradually eliminate its three percent tariff on Chilean copper, its 3.5 percent tariff on Chilean salmon and its 17.6 percent tax on Chilean wine.

The deal does not extend to sensitive Japanese farm produce such as rice, which Tokyo strongly protects. Abe and Bachelet also signed a joint statement saying they “share determination” in the fight against global warming and pledging to work together.

“Environmental problems on a global scale such as the destruction of the ozone layer and the diminishing of glaciers is impacting Chile and producing serious problems,” Abe said.

“With Chile an an important international partner we will continue to cooperate on various issues,” he added.

Bachelet earlier Monday had an audience with Emperor Akihito. She will later visit Hiroshima to pay respects to victims of the world’s first nuclear bombing.

She earlier said she did not plan to talk to Japan about the status of former Peruvian president Alberto Fujimori, who holds Japanese nationality on account of his ancestry and is under house arrest in Santiago.

AFP

Australia economy speeds ahead

Australia’s economy sped ahead last quarter as a boom in business and government spending outstripped all expectations, reviving speculation interest rates could have to rise yet further to curb inflation.

The Australian dollar jumped while bill futures slid as gross domestic product (GDP) rose 0.9 percent in the three months to end-June, breezing past forecasts of a 0.6 percent increase.

Annual growth accelerated to 4.3 percent, its fastest pace in three years, from 3.8 percent in the previous quarter.

“This economy is on fire,” said Joshua Williamson, a senior economist at TD Securities. “This is the third strong quarterly GDP number that we have had.”

The economy grew 1.6 percent in the first quarter and 1.1 percent in the last quarter of 2006.

However, such rapid growth carried risks for inflation, which had already picked up notably in the second quarter and forced the Reserve Bank of Australia (RBA) to lift interest rates to a decade high of 6.5 percent.

The central bank holds its September policy meeting on Tuesday and is still expected to keep rates unchanged given the recent turmoil in credit markets had clouded the outlook for the global economy.

However, the startling pace of growth in the second quarter combined with signs of a reacceleration in consumption for July and August has greatly raised the stakes for rates. “Obviously we’ve got a very strong economy on our hands,” said Rob Henderson, chief economist markets at nabCapital.

“That continues to underline the risk of excessive growth ahead and the potential that the RBA will need to move further to slow the economy down,” he added.

Reuters

HSBC’s China fund arm plans new life cycle fund

HSBC Holdings Plc’s.Chinese fund management joint venture aims to launch a life cycle fund, its fourth product, this year to raise up to 10 billion yuan ($1.33 billion), the venture’s head said on Tuesday.

The company has applied to the China Securities Regulatory Commission to launch the product, which will have a 20-year maturity, Steve Lee, chief executive of HSBC Jintrust Fund Management, said at the Reuters China Century Summit.

Lee said he expected to win official approval and launch the life-cycle fund, a mutual fund product designed for long-term investors, this year.

HSBC Jintrust also plans to launch a fund in May of next year to invest client money in overseas financial markets under China’s Qualified Domestic Investor Scheme (QDII), he said.

Chinese fund management companies, brokerages and banks are racing to launch QDII funds, a national scheme aimed at easing upward pressure on the country’s currency and broadening investment alternatives for domestic investors.

HSBC Jintrust, which is 49 percent owned by Europe’s biggest bank, now manages three funds with a total net asset value of more than 11 billion yuan.

China’s A-share market is not cheap following a massive bull-run that started in early 2006, but it is not dangerously overheated given the strong earnings growth momentum of domestic listed firms, Lee said.

The price earnings/growth multiple of many Chinese A-share firms remains less than one, compared with three times for Japan’s stock market when it peaked in the late 1980s, he said.

Reuters

NZ council to retain stake in Auckland Airport

Auckland City Council, the biggest single shareholder in takeover target Auckland International Airport Ltd , will retain its 12.75 percent stake but is not opposed to a foreign investor taking a minority stake, the mayor said on Tuesday.

The airport is the target of two bidders, state-backed Dubai Aerospace, which wants a majority stake of up to 60 percent, and the Canada Pension Plan Investment Board, which is seeking up to 49 percent.

Auckland City mayor Dick Hubbard said the council would not be a seller but might support a minority offer which could change the capital structure and dividend policy of the airport.

“The council gave a very clear indication it won’t touch the 12.75 percent stake, but it will give itself the opportunity for purchasing more shares or restructuring if it’s deemed appropriate,” Hubbard told Reuters.

He said there was no plan at this stage to acquire more shares, nor was there any in principle opposition to a bid for for a minority stake in the airport.

The Dubai Aerospace bid, which has the airport board’s backing, is for 51-60 percent of the company and in cash and securities and will cost about NZ$2.6 billion ($1.8 billion). It values the company at NZ$3.80 a share.

However, last Friday Dubai Aerospace said the airport company had not done enough to ensure its deal succeeds and was invoking procedures which could see the bid terminated this week.

Shares in Auckland Airport, a top 10 company and New Zealand’s main international gateway, last traded up 2 cents or 0.7 percent at NZ$3.09, and have gained 59 percent over the past year.

Reuters