China’s Wen offers to buy Greek debt

Sunday, 3 October 2010 22:21 -     - {{hitsCtrl.values.hits}}

ATHENS, (Reuters) - China offered on Saturday to buy Greek government bonds when Athens resumes issuing, in a show of support for the country whose debt burden pushed the euro zone into crisis and required an international bailout.

Premier Wen Jiabao made the offer at the start of a two-day visit to Greece, his first stop on a tour of Europe, and also said he wanted to boost shipping and trade ties with Athens, underscoring Beijing’s use of economic strength to win friends.

“With its foreign exchange reserve, China has already bought and is holding Greek bonds and will keep a positive stance in participating and buying bonds that Greece will issue,” Wen said, speaking through an interpreter.

“China will undertake a great effort to support euro zone countries and Greece to overcome the crisis.”

Wen and his Greek counterpart George Papandreou said in a statement the world’s nations need to coordinate their economic policies for global recovery to find a sure footing.

“The global economy shows signs of gradual recovery but many uncertainties remain,” the two leaders said in the statement, issued on Saturday by Papandreou’s office after the two men met in Athens.

In addition to seeing economic opportunities in Greece, China may calculate its support of a struggling European country will help deflect international criticism of its trade policies and its refusal to let its yuan currency appreciate sharply.

Wen did not specify how much Greek debt China would be willing to buy or which Chinese entities would buy the bonds.

Chinese state entities have been generally conservative about investing in foreign financial markets and the Chinese government faces domestic political criticism over losses incurred by these entities during the global financial crisis.

A senior Greek government official said Wen made clear his offer concerned buying bonds only when the country returned to markets.

Greece, which is currently funded through a 110 billion euro ($150 billion) EU/IMF bailout, is only issuing short-term T-bills for the time being.

Since the true scale of its debt burden emerged late last year, investors have shunned its bonds. The yield they demand to hold 10-year Greek debt has shot up to 10 percent, compared with just 2.3 percent for similar bonds from the euro zone’s biggest economy Germany, making it too expensive for Greece to seek long-term funding in international markets.

It has said it wants to return to markets some time next year to sell longer-term debt.

China, at loggerheads with the United States over the yuan and likely to face similar complaints during this European tour, emphasised its willingness to cooperate with the 27-nation EU on financial issues.

“China is prepared, hand in hand with the EU, as passengers in the same boat, to strengthen cooperation ... to confront the financial crisis,” Wen said. “I believe that we can undertake a genuine effort to promote the reform of the international financial system and strengthen its supervision,” he said.

Neither Wen nor Greek Prime Minister George Papandreou mentioned the Chinese currency at the news conference.

Wen said China wanted to boost cooperation with Greece -- which faces its worst recession in decades as it struggles with its debt -- on all fronts, including by setting up a shipping fund and doubling bilateral trade to $8 billion by 2015.

“China will set up a special Greek-Chinese shipping development fund for Greek shipowners on which it will invest, in an initial phase, $5 billion,” Wen told the news conference. “The aim is to offer Greek shipowners a basket of financial support to buy Chinese-made vessels.”

Greece and China pledged to stimulate investment in a memorandum of understanding and private companies signed a dozen deals in areas like shipping, construction and tourism.

With the global economic crisis and competition with other Balkan countries increasing, foreign direct investment in Greece fell from 6.9 billion euros in 2006 to 4.5 billion in 2009, according to Investment Ministry figures.

Chinese investment represents a very minor proportion of this, excluding a 35-year concession deal China’s Cosco signed in 2008 to turn the port of Piraeus into a regional hub for a guaranteed amount of 3.4 billion euros, according to port authority figures.

The investment memorandum does not target specific investment volumes, an official close to Investment Minister Harris Pamboukis said ahead of Wen’s visit.

“We want to build this strategic partnership with China,” the investment ministry official said. “The purpose is not a signature on something big.”

Wen will address the Greek parliament on Sunday and leave early on Monday for Brussels, where he will attend an EU-China summit before going on to Germany, Italy and Turkey.

Clinching business deals with countries such as China and Qatar would help boost confidence among Greek consumers and businesses, economic analysts said.

China’s Sinopec buys Repsol Brazil stake for $7.1 bln

MADRID/BEIJING,  (Reuters) - Chinese refiner Sinopec Group will buy 40 percent of Spanish oil major Repsol’s Brazilian arm for $7.1 billion, strengthening resource-hungry China’s presence in Latin America.

China has invested heavily in mining and oil assets in the region as well as in Africa in recent years and Friday’s deal puts it on course to be the biggest foreign direct investor in Brazil for 2010.

Sinopec is also bidding for oil and gas assets of Brazilian startup firm OGX worth a potential $7 billion, sources told Reuters last month.

For Repsol, the move delivers funds it needs to develop its deposits in Brazil, one of the world’s most important exploration markets since the discovery of massive subsalt oil reserves off its coast.

“We are delighted to share the development of the Brazilian projects with a partner with recognised prestige in the sector like Sinopec,” Repsol Chairman Antonio Brufau said in a statement.

Analysts and investors welcomed the deal, saying it valued the Brazilian assets at a premium to market consensus.

Repsol shares rose 5.6 percent to a 2-year high of 20.0 euros while construction firm Sacyr-Vallehermoso, which holds a stake of around 20 percent in Repsol, jumped 12.7 percent.

The deal also boosted shares in Portuguese oil company Galp , which holds offshore assets in Brazil. Analysts said the giant Tupi field where Galp has a 10 percent stake is in a more advanced stage of development than Repsol’s blocks.

The Chinese stock market was closed for a national holiday.

China’s push into Latin America has focused on oil-producing Brazil, mineral-rich Peru and oil- and soy-producing Argentina.

The latest deal calls for Sinopec to subscribe to a $7.1 billion capital hike in Repsol Brazil which will create one of the largest private energy companies in Latin America.

Merrill Lynch analysts in a note said the implied value of $10.7 billion for the 60 percent Repsol stake compared to analysts’ consensus value for the whole unit at $8-10 billion.

“It’s clearly positive, not only for Repsol but for all oil companies that have interests in Brazil,” said Jordi Padilla at Madrid-based fund manager Popular Gestion Privada. The firm, with 1.4 billion euros ($2 billion) of assets under management, holds holds Repsol shares.

Sinopec said the company was targetting the production of 200,000 barrels per day oil equivalent from the mostly offshore blocks.

“It’s a large-scale asset of premium quality and potentially with more discoveries to be made in the future,” a Sinopec official told Reuters.

Repsol expects production of more than 50 million barrels per year by 2018-2020 from the Brazil deposits it currently holds, Chief Operating Officer Miguel Martinez told Reuters Insider.

The deal, which will require approval from competition authorities, is on a par with Sinopec’s acquisition of Swiss oil and gas explorer Addax for some $7.24 billion, with assets in Nigeria and Iraq’s Kurdistan region.

Repsol, in partnership with Brazilian state-run oil company Petrobras, has a stake in some of the larger deep-water subsalt blocks off Brazil’s southern coast, including a 25 percent stake in BM-S-9 which holds the Guara and Carioca fields.

Guara holds 1.1 billion to 2 billion barrels of recoverable oil. Carioca is considered a promising field as well but has not yet yielded production estimates.

Repsol’s Brazilian unit requested permission from the market regulator to issue shares on the Brazilian stock exchange in August. The initial public offering is now off the cards, Repsol’s Martinez said.