Foreign insurers in JVs with local money managers

Foreign insurers in JVs with local money managers

Aviva, the world’s fifth-largest insurance group, has inked an agreement with Henan-based Central China Securities to set up a joint-venture asset management company, sources told China Daily yesterday.
“Aviva will hold a 49 percent stake in the joint venture, while the remaining 51 percent would be held by Central China Securities,” the sources said. “The new company will apply for regulatory approval soon.”
Aviva has a 50-50 joint venture life insurance company with China National Cereals, Oils &Foodstuffs Corp (COFCO) Ltd. The insurer started operations in 2003.
Kathleen Jiang, head of the strategic planning sector at Aviva China, told China Daily in an earlier interview that setting up a new firm would make the structure clearer, although it will be more time-consuming compared with acquiring an existing company.
Canada’s top life insurer Manulife Financial Corp, however, has chosen the latter path. It said late on Monday that it would buy a 49 percent stake in ABN AMRO TEDA Fund Management Co for $156 million in cash, from Fortis Bank SA, which is in turn controlled by France’s largest bank BNP Paribas.
“This accelerates our expansion in China’s huge growth market by several years,” Donald Guloien, Manulife’s chief executive, said in a statement.
The ABN AMRO TEDA Fund Management Co deal is expected to close in the first quarter of 2010, and the new joint venture will be called Manulife TEDA Fund Management Co Ltd. The company said the acquisition is expected to boost Manulife Financial’s earnings in the first year and have a negligible impact on capital levels.
Established in 2002, ABN AMRO TEDA Fund Management Co currently has $3.8 billion assets under management.
According to Manulife’s estimate, the asset management industry in China is poised for rapid growth over the next decade, with assets under management slated to exceed $1 trillion from $338 billion now.
“China has one of the highest savings rates in the world at 51 percent of GDP and to date, a very high proportion of household wealth is held in the form of deposits,” Manulife said.
More than 30 foreign institutions, including JP Morgan, Credit Suisse and Morgan Stanley, have formed fund ventures in China, while more companies are seeking access to the Chinese fund market.

AGCO to invest $100m in China

AGCO to invest $100m in China

AGCO, the world’s third biggest agricultural equipment maker, said on Wednesday it would invest $100 million in China in the next three to five years to boost its presence in the emerging market.
The company will open two factories in China next year, one in the eastern city of Changzhou in Jiangsu province making low and medium-powered tractors, generators and transmissions and the other in the northeastern Heilongjiang province producing high-powered tractors, combines and balers.
“The growing population and the shrinking arable land demand better mechanization in the agriculture sector. The demand in China will increase significantly over the next years,” said Hubertus M. Muhlhauser, the company’s senior vice president at a press conference.
He said the subsidy offered by the Chinese government for the farmers which topped 13 billion yuan ($1.91 billion) this year would also facilitate the company’s expansion.
The Georgia-based company was founded in 1990 and offers a wide range of agricultural utilities including tractors, combines and sprayers. In 2008, its sales revenue was $8.4 billion.

BAIC may bid for select Saab assets

BAIC may bid for select Saab assets

China’s BAIC, part of a group that abandoned its bid to buy General Motors’ Saab unit, could still bid for some Saab assets on its own but is unlikely to try for the whole company, analysts said.
Beijing Automotive Industry Holding Corp (BAIC) must decide its next move after its consortium, led by tiny Swedish luxury car maker Koenigsegg, pulled out of talks to buy Saab, putting in doubt the future of the loss-making GM unit.
BAIC said yesterday it was reviewing its options and reaffirmed its commitment to become more global.
“Beijing Automotive Industry Holding Corp states that becoming more international… has always been our strategic focus,” it said in a statement.
“With regard to Koenigsegg’s withdrawal, we will carefully evaluate this project anew and make appropriate arrangements,” BAIC said.
Sweden effectively ruled out a state bailout of Saab, saying a private owner was the company’s only chance to survive.
BAIC has been in the market for foreign car brands and intellectual property, but is less interested in the more complex proposition of running a loss-making manufacturing operation outside its home market, analysts said. Accordingly, it is unlikely to come back and make a solo bid for all of Saab.
“The pullout of Koenigsegg may not be a chance for BAIC as it seems to be,” said Zhang Xin, an analyst at Guotai Junan Securities. “It’s true that BAIC does not have its own car brand and it’s desperate to get the technology, but it might not get it.”
BAIC could still return to the table if it sees a chance to selectively buy some of the Saab assets it wants, in particular some of its older product designs, said Boni Sa, an analyst at CSM Worldwide.
“I think BAIC might give it a try if it has a chance to get the old Saab 9-5 and 9-3 platforms,” Sa said. “Even though the technologies are a bit outdated, they’re better than nothing.”

Gindalbie may get funding from CDB

Gindalbie may get funding from CDB

Western Australian iron ore producer Gindalbie Metals Ltd and Chinese steelmaker Anshan Iron &Steel Group Corp (Angang Group) are planning to invest A$1.8 billion to develop the Karara iron ore mine in Australia and expect to obtain loans amounting to $1.2 billion from China Development Bank by early next year.
The Australian miner said it has got a letter of commitment from China Development Bank (CDB) and is discussing the detailed term sheet, according to the company’s Chief Executive Officer Garret Dixon.
The accord may be signed by the end of this year, though more likely early next year and the terms of the loan are “very competitive”, Bloomberg quoted the company chief as saying.
Work on the Karara project estimated to have a production capacity of 8 million tons of magnetite and 2 million tons of hematite annually started in November this year.
Analysts said Chinese steelmakers have not been successful in buying high-grade iron ore mines, as the Australian government is not keen on selling high quality assets.
But the quality of Australian iron ore is generally better than that in China, said industry analyst Zeng Hai with Guolian Securities.
Angang and Gindalbie hold 50 percent each in the Karara project, located 225 km east of the Geraldton Port in Western Australia. It is expected to start production in 2011 and would supply iron ore concentrates of at least 8 million tons per year to the Chinese steelmaker.
Angang Group imports only 20 percent of its iron ore requirements from abroad and is less reliant on foreign resources compared to other steelmakers. Baoshan Iron &Steel Co, China’s largest steelmaker, imports 95 percent of its raw material requirements from other countries, according to a research note by China Chengxin International Credit Rating.
Chinese steelmakers will have stronger bargaining power in price negotiations only if they have access to more iron ore reserves, Zeng said.
Angang Group holds 36.28 percent stake in Gindalbie Metals and is the majority shareholder in the Australian miner after two share placements in June 2007 and early 2009.

Sinopec, TPG considering joint bid for LyondellBasell

Sinopec, TPG considering joint bid for LyondellBasell


Any bids for LyondellBasell may compete against a reorganization plan. [Bloomberg News]
China Petroleum &Chemical Corp (Sinopec), the nation’s biggest oil refiner, and US buyout firm TPG have weighed a bid for bankrupt chemicals company LyondellBasell Industries AF that could challenge Reliance Industries Ltd’s offer of about $12 billion, said two people familiar with the matter.
Sinopec and TPG reviewed LyondellBasell’s finances and discussed making a joint bid, said the people, who asked not to be identified because the negotiations are private. It was unclear whether one or both of the parties will proceed with an offer, and the sale process remains fluid, the people said.
A buyer would gain US chemical assets that use natural gas as a raw material, which is cheaper than the oil-based ingredients mainly used in Europe and Asia, said Mark W. Connelly, an analyst at Sterne Agee &Leach Inc in New York. LyondellBasell collapsed less than two years after it was created in a $12.7 billion buyout led by billionaire Len Blavatnik’s Access Industries Holdings.
“It’s a good company that had a bad balance sheet at the wrong part of the business cycle,” Carl Blake, a Washington-based analyst at Gimme Credit LLC, said in a telephone interview. “It was over-leveraged and got caught in a commodity cycle that went to hell in a hand basket.”
Bonds of LyondellBasell’s Arco Chemical Co unit climbed to an 18-month high on the news. Arco’s $225 million of 9.8 percent senior secured bonds due in 2020 rose 2.5 cents to 83.5 cents on the dollar as of 4:23 pm yesterday, the highest since May 21, 2008, after gaining 8.875 cents the previous day, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Any bids for Rotterdam-based LyondellBasell, which filed for bankruptcy in April, may compete against a reorganization plan including a rights offering backstopped by Access, Apollo Management LP and Los Angeles-based Ares Management LLC, the people said. TPG, the Fort Worth, Texas-based buyout firm founded by David Bonderman, made an earlier bid to backstop the offering that was rejected, the people said.
Representatives at TPG, Access and Apollo declined to comment. Sinopec’s Beijing-based spokesman Huang Wensheng also declined to comment. Bill Mendel, an Ares spokesman, confirmed the investment firm is part of a group backstopping the rights offering.
LyondellBasell is being advised by Evercore Partners Inc, according to a person familiar with the matter. An Evercore representative declined to comment.
Reliance, the oil refiner and explorer controlled by Indian billionaire Mukesh Ambani, on Nov 21 said it offered an undisclosed amount of cash for a controlling stake in the company. Perella Weinberg Partners is advising Reliance on its bid and JPMorgan Chase &Co is helping arrange financing, according to people familiar with the matter.
Officials at Perella Weinberg and JPMorgan declined to comment. Reliance spokesman Manoj Warrier declined to comment on its advisors or the value of its bid.
LyondellBasell was formed in December 2007 when Basell AF bought Houston-based Lyondell Chemical Co. About 55 percent of sales last year were in North America and 38 percent in Europe.
The company has $7.06 billion in bonds and loans maturing next year and an additional $20 billion due through 2027, data compiled by Bloomberg show. It is asking creditors to forgo about $18 billion of that under the reorganization plan filed with a US court, Somshankar Sinha and Vikash Jain, analysts at CLSA Asia-Pacific Markets, said in a note.

CNPC expects more overseas discoveries

CNPC expects more overseas discoveries

China National Petroleum Corp., the country’s biggest oil and gas producer, expects additional “important” overseas energy discoveries this year after striking oil in Sudan, Chad and Kazakhstan, China Daily reported Wednesday.
The company’s Prosopis C-2 well at Block H and the Baobab S-2 well at Block Baobab S in Chad were tested with “high oil flow”.
Its Azraq C-1 well also tested positive at Blocks 1/2/4 in Sudan and the exploration well CT-38 in Kazakhstan was tested with high oil and gas flow, the newspaper said.

CCTV ad slots are snapped up

CCTV ad slots are snapped up


A bidder from dairy giant Mengniu Group makes a bid yesterday as companies vied for CCTV prime-time advertising slots for next year.[China Daily]
Chinese entrepreneurs yesterday sent a strong signal that they have put the global economic downturn behind them when they swarmed the China Central Television (CCTV) building to splurge tens of billions of yuan on the network’s prime-time advertising slots for next year.
They were there as the national broadcast giant began its annual auction, raising bids totaling 10.97 billion yuan ($1.6 billion) in about 13 hours. This year’s bids were the highest for 16 years, up 18.5 percent on last year’s 9.26 billion yuan, said CCTV.
Sichuan-based alcohol maker, Langjiu Group, won yesterday’s first bid, committing 33 million yuan for the exclusive right to have its name associated with the top scorer list during next year’s soccer World Cup in South Africa. Li Mingzheng, deputy general manager of Langjiu, said the company spent 400 million yuan in total.
Chinese milk giant Mengniu was also one of the day’s big spenders, shelling out 204 million yuan.

Experts said the 2010 CCTV Prime Advertising Resource Bidding was an indicator of the health of the Chinese economy.
Xia Hongbo, director of CCTV’s advertising department, said: “The auction is a sign of entrepreneurs’ confidence toward next year’s business in the country. They are optimistic.”
Several CCTV celebrity presenters helped announce the results of the auction. Some said it was one of the most important economic stories of the year.
Xia said household products and construction materials were the fastest-growing sector of advertisers with total bids growing by 200 percent year-on-year.
Bids from the sellers of household electrical appliances grew by 80 percent and the auto industry spent 70 percent more than last year.
Xia said 50 international companies took part. They spent 28 percent more than they did in 2008.
Home appliance producer Midea paid 52 million yuan for a slot during the 2010 Chinese New Year countdown, which is part of CCTV’s Spring Festival Gala Evening.
Companies that bid for airtime were mainly enterprises depending heavily on people’s disposable income, such as home appliance firms, medical products sellers and the food and beverage sector, said Yao Jinyuan, chief economist with the National Bureau of Statistics.
Zha Wei, an industry insider and vice-president of FliMore Media, said: “As a national television network, CCTV has advantages in certain genres, for example coverage and credibility or authority, compared to local or provincial stations.”
Zha added that CCTV had revamped its flagship news programs since June, which helped it gain popularity.
Li Guangdou, a branding expert, said the cost of CCTV advertisements increased 20 percent year-on-year.
While many entrepreneurs complained about the soaring prices, Zha said companies were still willing to pay because advertising slots with CCTV are relatively scarce.
Statistics from CSM Media Research show more than 72.8 million people watch CCTV programming each day – seven times the audience for NBC Nightly News, one of the highest-rated news programs in the US.
Some multinationals aggressively participated in the bidding. Industry analysts had predicted they would keep away because of the global economic downturn.

CNPC endeavors to meet rising gas demand

CNPC endeavors to meet rising gas demand


Taxis line up to get their tanks filled on a viaduct in Southwest China’s Chongqing municipality November 16, 2009. The city is in severe shortage of natural gas and some taxi drivers waited for about two hours to get tanks filled, Chongqing Evening News reported.[Photo by Zhong Zhibing/Chongqing Economic Times]
China National Petroleum Corporation (CNPC), the country’s leading oil and gas producer, told Xinhua Wednesday it has taken active measures to raise gas supply and meet rising market demand triggered by heavy snows and falling temperatures.
CNPC figures revealed that daily natural gas consumption volume in north China surged 56 percent year on year between November 1 and 16, while daily gas consumption in Beijing alone rose 57 percent year on year in this period.
The daily natural gas supply of CNPC nationwide has increased from 169 million cubic meters at the beginning of this month to the current 189 million cubic meters, said the Beijing-based firm.
Most of the company’s gas transmission pipelines have reached their full capacity. The oil and gas producer would do its best to guarantee the demand for local residents’ daily life use and the demand in Beijing and other cities, by reducing supplies to some industrial enterprises.
China embraced severe cold weather and heavy snows this winter, with almost all of north China expected to experience continuing low temperatures and gales, according to weather forecast of the China Meteorological Administration on Sunday.
Meanwhile, almost all of southern China will be covered by snow and rain, with Hubei and Anhui expecting storms, according to the forecast.

Peugeot Citroen recalls 263 cars in China

Peugeot Citroen recalls 263 cars in China

French auto maker PSA Peugeot Citroen will recall combined 263 autos of three models sold to the Chinese mainland due to defective radio, China’s product quality watchdog has announced.
The 263 autos included two of 307 CC produced between July 21 of 2006 to March 19 of 2007, 215 of C4 coupe manufactured between July 29 of 2006 to March 19 of 2007, and 46 of C5 made between July 17 of 2006 to March 20 of 2007, the General Administration of Quality Supervision, Inspection and Quarantine said in a statement on its website Friday.

The defection with radio software would lead to radio malfunction after CD ejection. It would also cause continuous running of radio after auto engine stops working, which would exhaust auto battery and result in failure in starting engines.
Authorized service centers will contact owners by letter to arrange software upgrading after the recall was launched Friday, according to the statement.

Nokia hopes to navigate way to higher sales

Nokia hopes to navigate way to higher sales

 

A navigation cellphone used by a taxi driver in Beijing.Shipments of navigation cellphones in China reached 13 million units in 2009. [Agencies]
Finnish mobile phone maker Nokia’s move to provide a free navigation service in China is expected to boost the sale of navigation cellphones in the country, experts said.
That may also help Nokia maintain its dominant position in the country as users turn to CDMA and TD-SCDMA handsets, a market in which the Finnish firm does not have a significant presence.
Nokia Oyj, the world’s biggest maker of mobile phones, said on Thursday that the company would offer the free navigation service on its Ovi Maps application in 74 countries and regions.
The company said about 20 million Nokia handset users could use the service right now, and it expects to sell 80 million navigation smartphone handsets globally in the next 18 months.
David Tang, vice-chairman of Nokia China, said he expected the launch of the new service to significantly boost the company’s smartphone sales in China.
“We have seen great interest from Chinese users in the navigation service,” he said, adding that the country is Nokia’s largest single market for smartphones.
According to figures from research firm GFK, shipments of navigation cellphones reached about 13 million last year in China, up from around 5 million in 2008. That accounted for about 7 percent of the country’s total cellphone market.
“Navigation cellphones have presented a strong challenger to other navigation devices during the past few years, but their penetration has been limited in China mainly due to their high price,” Pang said.
He said Nokia’s move to make its own navigation service free will significantly reduce the cost of navigation cellphones in the country.
Although there are no official figures on sales of navigation devices in China, industry analysts expect market turnover to reach 10 billion yuan this year.
Pang said Nokia’s move would accelerate the trend of navigation cellphones replacing similar devices.
Nokia bought Chicago-based Navteq in 2008, acquiring a maps database to compete with Google Maps and navigation device companies such as TomTom NV and Garmin Ltd.
According to Gartner, Nokia’s global market share fell about 3 percentage points to 39.3 percent in the third quarter, as new competitors such as Google and Apple Inc offered free navigation services.
In China, Nokia’s market share declined from 40 percent a year ago to about 35 percent by the end of last year, as China Mobile and China Telecom aggressively pushed their own 3G services that are based on technologies that only a handful of Nokia handsets can support.