Emerging Markets Weekly News

Week ended 27 January 2011

Brazil: Petrobras will nominate its current director of Gas & Energy, Maria das Gracas Foster, as the chief executive; this is a positive development as she has been with the company for more than 30 years and was responsible for transforming the gas and energy segment into a profitable business. Vale obtained an environmental licence that allows it to mine a new deposit of high quality iron ore, strengthening the miner’s position as the leading global producer.

China/Hong Kong: CNOOC, US-based ConocoPhillips and the Chinese government will settle compensation claims relating to the oil spill in Bohai Bay, with ConocoPhillips bearing the bulk of the costs. The move paves the way for production to resume.

India: In a landmark case, the Supreme Court overturned a Mumbai high court judgement requiring Vodafone to pay US$2.9 billion in capital gains tax for its US$10.9 billion acquisition of Hutchison Essar in 2007. The ruling, which is in line with global tax practices, bodes well for foreign direct investments into the country.

In earnings news, Grasim Industries’ net profits rose sharply as demand recovered; its unit Ultratech Cement’s earnings almost doubled on firmer selling prices. Godrej Consumer Products and Asian Paints also delivered resilient results despite moderating domestic growth. Hero MotoCorp was aided by brisk sales of its rebranded motorbikes. Petrochemicals and gas pipeline operator GAIL saw double-digit growth in sales and profits.

Malaysia: Permodalan Nasional Berhad (PNB) raised its takeover offer for SP Setia to M$3.95 a share. The new deal will see the chief executive stay on to provide management continuity and an opportunity for the developer to increase its land bank.

Mexico: Banorte reported solid fourth-quarter results driven by robust loan growth and improvement in asset quality.

Russia: Sberbank completed the acquisition of Troika Dialog, creating a new investment banking division in a bid to keep pace with rival VTB. Lukoil intends to increase its dividend pay-out. Senior management increased their stakes in the company, reflecting their confidence in the oil and gas producer.

South Africa: Brewing firm SABMiller will transfer its eastern European beer businesses to Turkish brewing group Anadolu Efes in return for a 24% stake in the enlarged company. The move is a bid to boost sales in Russia, other former Soviet states, Turkey and the Middle East.

Sri Lanka: Aitken Spence finalised the sale of a 30% stake in a port-expansion project in Colombo to China Merchant Holdings on concerns the project would fail to meet initial targets. The move reflects the company’s focus on shareholder returns and should lift third-quarter earnings significantly.

Thailand: PTT Exploration & Production may buy UK-listed Cove Energy, in line with its overseas expansion strategy. Toronto-based Fairfax Financial Holdings will acquire a 25% stake in Thai Reinsurance. Siam Commercial Bank’s profits expanded on higher loans and decent margins whereas Siam Cement’s earnings were hurt by the floods.

Turkey: Garanti expects monetary policy to ease this year and banking profits to rise.

We hold all the above companies highlighted.