Saturday, September 9th, 2017


China invests US$9.1b in Rosneft as Glencore, Qatar cut stakes

BEIJING, Sept 9 — Chinese conglomerate CEFC will buy a 14.16 per cent stake in Russian oil major Rosneft for US$9.1 billion (RM38.2 billion) from a consortium of Glencore and the Qatar Investment Authority, strengthening the energy partnership…

China invests RM38.2b in Rosneft as Glencore, Qatar cut stakes

BEIJING: Chinese conglomerate CEFC will buy a 14.16% stake in Russian oil major Rosneft for US$9.1 billion (RM38.2 billion) from a consortium of Glencore and the Qatar Investment Authority, strengthening the energy partnership between Moscow and Beijing.

CEFC China Energy has grown in recent years from a niche oil trader into a sprawling energy conglomerate and the transaction will allow China, the world's second largest energy consumer, to boost cooperation with the world's top oil producer.

The deal comes as the United States imposes a new round of economic sanctions on Russia, making it difficult for large Western firms such as Glencore to develop partnerships and increase ties with state-owned firms such as Rosneft.

Glencore said in a statement that CEFC will buy shares at a premium of around 16 per cent to the 30-day volume weighted average price of Rosneft shares without naming the price. A CEFC spokesman said the company would pay US$9.1 billion.

Rosneft's market capitalisation stands at US$57 billion and the deal makes it one of the largest investments ever made by China into Russia.

Glencore and QIA will retain stakes of 0.5% and 4.7% in Rosneft respectively.

The Kremlin has been seeking to expand its ties with China, especially since the West imposed wide-ranging sanctions on Moscow to punish it for the annexation of Crimea and an incursion into east Ukraine in 2014.

Russia tops the list of Chinese crude suppliers where it competes with its arch-rival Saudi Arabia, the world's largest oil exporter.

Opaque deal

Glencore and QIA agreed to buy a 19.5% stake in Rosneft in December 2016 for over 10.2 billion euros to help the Kremlin plug budget holes.

The transaction coincided with expectations of political detente between Moscow and Washington after Donald Trump became US president and pledged to improve ties with Moscow.

Rosneft is run by Igor Sechin, a close ally or President Vladimir Putin, who awarded special state decorations to the head of Glencore Ivan Glasenberg for executing the transaction.

Putin also awarded state decorations to the Russian head of Italian bank Intesa SanPaolo, Antonio Fallico, for helping fund the deal with a €5.2 billion (RM26.2 billion) loan.

The transactions has, however, raised a lot of questions among bankers and market analysts.

Glencore and QIA never disclosed the final beneficiaries of the stake and Intesa could not syndicate the loan from other banks to share risks as most lenders declined to get involved because of new sanctions on Russia.

Intesa said its €5.2 billion loan will be reimbursed following the CEFC deal.

“It always looked as if the Qatar-Glencore deal was hastily arranged so as to allow the privatisation to take place by the end of last year and the proceeds booked to the federal budget,” said Chris Weafer from Macro Advisory consultancy.

Last month, Washington imposed further sanctions on Moscow in the strongest action against Russia since 2014 — in part as a response to conclusions by US intelligence agencies that Russia meddled in the presidential election.

Yesterday, Sechin said QIA and Glencore cut the stakes partially because of a decline in the US dollar against the euro, which made debt servicing more expensive.

Sechin told reporters CEFC would get access to Rosneft's oil fields and petrochemical projects in East Siberia to guarantee bigger synergies.

“From Rosneft's point of view, the arrival of such a partner is positive as it shows that the foreign investors still keep their interest to the Russian oil industry,” said Alexander Kornilov from Aton brokerage in Moscow.

CEFC said the deal would give it annual equity oil production of 42 million tonnes (840,000 barrels per day) and access to oil and gas reserves of 2.67 billion tonnes (20 billion barrels).

The deal will be China's second largest oil and gas acquisition after the US$15.1 billion purchase of Canada's Nexen by CNOOC in 2013. Earlier this decade, Beijing also loaned US$25 billion to Russia to help it build a pipeline from Siberia. — Reuters

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Ringgit likely to trade firmer against greenback next week

KUALA LUMPUR: The ringgit is expected to trade firmer next week on easing geopolitical tensions in North Korea, amid conducive domestic monetary condition that is supportive of growth, which saw the ringgit climb to a ten-month high on Thursday at 4.1920/1970 against the US dollar from 4.2690/2720 in the previous week.

Bank Negara Malaysia (BNM) also maintained the overnight policy rate at 3.00 per cent since July 13, 2016 at its Monetary Policy Committee (MPC) meeting.

Kenanga Investment Bank Bhd said the MPC was of the view that the ringgit had strengthened and was closer to the country’s economic fundamentals.

Malaysia’s international reserves also climbed to US$100.5 billion (RM431.7 billion) as at Aug 30, 2017, compared with US$100.4 billion (RM431.0 billion) registered as at Aug 15, 2017.

Meanwhile, Oanda Asia-Pacific Trading Head, Stephen Innes, said other than that, Malaysian bond appeal was raging as foreign exchange led the charge with short-term notes getting scooped up as the ringgit carry was back in vogue.

“I'm looking at the Malaysian economy to be the spark that could ignite a deeper rally in the ringgit,” Innes told Bernama, adding that Malaysia's stellar export data released this week continued to resonate with investors.

The local note was quoted mostly higher against other major currencies.

Based on a Friday-to-Wednesday basis due to the holiday-shortened week, the local note strengthened versus the Singapore dollar to 3.1342/1398 from 3.1482/1514 but depreciated against the Yen to 3.8919/8977 from 3.8837/8882.

The ringgit rose against the British pound to 5.5129/5203 from 5.5168/5220 and appreciated against the Euro to 5.0551/0624 from 5.1010/1063.

The market was closed on Thursday and Friday last week and Monday this week for a special public holiday. — Bernama

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