Must read article about Sino-Latin American relations

A must read article for anyone interested in Sino-Latin American relations was published today on SeekingAlpha’s website.  It is written by Erik Bethel, one of the four founders and CEO of Sino-Latin Capital.  I highly recommend it to anyone even mildly interested in the growth of Sino-Latin American relations.

Click here to access the full article direct from SeekingAlpha.

Travel to any country in Latin America and you will see the visible hand of China at work: a computer manufacturing plant in Mexico, a copper mine in Peru, a football stadium in Costa Rica. In the year 2007, the thought of China in Latin America would have appeared, at best, improbable. But in a three-year stretch, China signed free trade agreements with Chile, Peru and Costa Rica, inked billions of dollars worth of deals in oil and mining projects throughout the region, and supplanted the US as Brazil’s biggest trading partner. Once almost unseen in Latin America, China’s bilateral trade has risen from $12bn in 2000 to well over $150bn today.

Given the importance of its new Asian friend, Latin Americans are rolling out the red carpets to Chinese business delegations and jumping on planes not only to Beijing but also to Shanghai, Shenzhen, and Tianjin.

Rationale Behind Chinese Investments in Latin America [...]

Please visit SeekingAlpha to read the full article

China to create $5 billion fund to invest in Latin America

In line with China’s outbound investment strategies in Africa and Asia, China is now planning to create a $5 billion usd investment fund for Latin American investments.

The funds target investments will include, infrastructure (probably to help the Chinese get commodities out), agriculture, mining and energy.

Read more in Spanish from Argentinean DERF Agencia de Noticias.

Crude Oil and China

New measures show China imports record level of crude oil. Inventory replenishment is cited as a driver. [Tantao News]

Newswire: Peru, Gold, Mining Exports

Peru’s gold project portfolio demands US$ 4.5 billion investment — Andina

The portfolio of gold projects identified in Peru are likely to demand an investment of US$ 4.5 billion investment in the next six to eight years, which shows the country’s great mining potencial, reported Wednesday Peru’s National Mining, Petroleum and Energy Society (SNMPE).

Gold production in Peru to increase by 10% this year — Andina

Peru’s gold production would register an increase of 5-10% by the end of 2010, totaling 200.2 tons, Peru’s Mining, Petroleum and Energy Society (SNMPE) estimated today.

Peru’s mining exports up 53.8% totaling US$ 3.1 billion in January-February — Andina

Peru’s mining exports in the first two months of the year totaled US$ 3.1 billon,a 53.8 percent rise compared to the same period last year, the Ministry of Energy and Mines (MEM) reported.

Interactive map of China’s overseas investments

Click here to view the map, courtesy of Forbes

Since 2005 Chinese firms and arms of the Chinese government have invested hundreds of billions of dollars in foreign companies and raw materials. Each dot on this map tracks one of those investments, with larger dots representing…

Chinese companies step up their game; plan $3.1 billion investment in Argentina

Hot off the presses — CNOOC, has announced plans to step up its overseas acquisitions with a planned purchase of a 50% stake in Argentina’s second largest oil producer Bridas Corp, a subsidiary of Bridas Energy.  If the deal goes through Bridas Energy would become equal partners with CNOOC in Bridas Corp.

Bridas is controlled by the wealthy Argentine businessman Carlos Bulgheroni who also owns a nice 40% stake in Pan American Energy LLC, Argentina’s largest crude oil exporter.  Pan American Energy LLC also owns energy assets in Chile and Bolivia–which China may eventually like a piece of as well.

As the worlds second-biggest energy consumer, after the United States, China is searching for oil assets across the world.  This however, would be the first major purchase by CNOOC, China’s biggest offshore oil explorer in Latin America.  Since 2008 Chinese companies have spent around $13 billion usd on energy acquisitions and are currently bidding for assets in countries ranging from Ghana, Nigeria and Uganda.

Analyst, Neil Beveridge of Sanford C. Bernstein & Co., told Bloomberg in this article, “This seems like a relatively attractive valuation and the acquisition is entirely in keeping with the Chinese government’s policy of increasing oil reserves.”

Once again, China is on the move people.  As I sit here typing this post I can feel the cold air blowing back into Shanghai and I am thinking to myself how if this entire country had two space heaters running like I do right now the world might self-implode… (just a bit of sarcasm incase you didn’t catch it).

Shanghai to Challenge HK on IPO’s

It seems the latest buzz is how Shanghai is set to challenge Hong Kong’s status as the world’s IPO “fund-raising king.”  CNBC, Bloomberg, China Daily, Reuters, etc are all talking about it.  CSA asks, is this a legitimate claim?

It is difficult to argue with the numbers.  According to this article, HK is expected to raise about $47.7 billion this year in 2010, while Shanghai is predicted will attract about $55.7 billion.

The key question to ask is, who is raising this money?  Hong Kong has the institutions, history and legal framework for international company’s to list on its bourse, while Shanghai does not.  In other words, the mainland may attract more money in IPO’s, but the money is going to be raised primarily by mainland company’s–specifically ones state owned entities.

Shanghai is preparing a international board which will allow foreign company’s to list on the mainland but, when this will come online is anybody’s guess.  Shanghai still lacks a developed insurance market, many private company’s on the mainland fear listing because of the potential of being forced to pay higher taxes after they make their accounting public / transparent, margin trading and short-selling is limited, the bond market is small, and stock market futures were only introduced today (see this Bloomberg article).

Nonetheless, there are company’s working on getting access to Shanghai.  The China Daily reports the first company’s which are hoping to list on the mainland’s A-share market are HSBC and the global exchange group NYSE-Euronext.  HSBC, is essentially the main player in HK’s HengSeng inde, while NYSE-Euronext represent the investors vehicle for investing in shares of the New York Stock Exchange its its European Counterpart.  Once again CSA asks, “where do regular company’s from abroad fit into this context?

In this article from the China Daily, Terence Ho, a analyst with Ernst & Young explains “Currently, the two places have different roles.  Hong Kong caters to millions of international investors while Shanghai mainly targets domestic investors. In the short term, Shanghai is unlikely catch up with Hong Kong in terms of international exposure and liquidity.”

CSA is inclined to agree with Mr. Ho, the two markets do have different roles at the moment.  As hungry as company’s around the world are tap mainland capital, China would rather have both financial centers fill different niches at the moment.

Shanghai will only come to dominate the Hong Kong’s IPO market once its financial services expand and it develops the framework for facilitating the listing of international company’s on the mainland.

The growth of stock markets in Latin America

The Latin Business Chronicle published a story today which technically, was supposed to focus on the growth of Colombia’s stock exchange and explain why it was the regions best performer last year.

In addition to Colombia, the article also shares data complied by Economatica on the growth of the other major stock exchanges in the region, which is what CSA will be sharing with you today.  To read the full article from the Latin Business Chronicle click here.

Colombia – Best performer in Latam last year, IGBC (Colombia’s benchmark) stock index has grown in value by 927.9% during the past 10 years, and average decline in value of transactions in 2008 was 2.3%—lower than all other countries in the region

Brazil – Latin America’s largest stock market, Ibovespa (Brazil’s benchmark) stock index has grown 301.3% during the past 10 years, and the average decline of transitions in 2008 compared with 2009 was 13.6%.

Mexico – IPC (major benchmark index in Mexico) has grown 250.5% during the past 10 years, and the average decline in transactions last year was 13.9%

Venezuela – The Caracas stock index has grown by 916.5% during the past 10 years, and the average decline in transactions was 29.5% last year—the second worst in Latin America.

Argentina – The Merval inces has grown by 321.3% during the past ten years, and had the worst average decline in transactions last year, suffering a decline of 54.4%.

Peru – The Lima stock index (IGBVL) has been one of the regions best performing in the past few years.  Seeing growth of 671.1% during the past 10 years, and a decline in average transactions last year of 21%.

Chile – Last but not least, Chile’s IPSA index has grown by 218.8% over the past 10 years, and the average decline in transactions last year was a mere 3.6%-second best next to Colombia.

When everyone’s bullish on China… be careful

Markets soured higher across the world today, Monday Jan 4, 2010… mostly on news of China’s manufacturing data, which was better than expected.  This CNBC video provides a few perspectives that are not quite as bullish and offers some good insight if you’re a China investor.

Don’t adopt a ‘buy and hold’ strategy when investing in China, advises Chi Lo, head of overseas investment at Ping An of China Asset Mgmt.

China’s private sector ventures into Latin America

A private Guangdong based firm by the name of Rixin Development, has reached an agreement to buy a majority stack in the ownership of a Chilean iron ore mine.

Rixin Development will acquire a 70% stake in the Chilean property.  Such a deal shows the power of China’s up and coming company’s.  For starters,  Rixin Development is listed only on a local provincial enterprise information website,  sdwin.com.  The company does not have its own home page.  Officially it is a “trader for home appliances, textiles, auto parts and so on, and importer and exporter of various products and technologies.” However, I wish any readers the best of luck if they undertake the challenge to find any further information from a official company medium.

If you follow Alibaba.com’s 101 on how to avoid being scammed in China, such a deal should probably send alarm bells off.   Perhaps in the post, economic-recession world of 2010, the traditional elements which define a professional entity are no longer necessary.  Especially when your a developing Latin American country hungry for investment… or a private investor in China, STARVING for investment opportunities in a very over-saturated market with little options on where to park your capital and have it grow at the same time.  It is clear, the deal is going through and that the company is legitimate.

Li Zihao, president of Rixin was recently quotes saying, “privately-owned companies are in a better position to invest in overseas natural resources.” Time will tell if this is actually true, or if the central government is content with allowing such a dynamic to emerge.

Read a more comprehensive article on the facts (which are known) surrounding this deal via this article over at ChinaMining.org.