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Strategies & Market Trends : True face of China -- A Modern Kaleidoscope -- Ignore unavailable to you. Want to Upgrade?

To: RealMuLan who wrote (2229)	10/7/2007 7:15:56 PM
From: RealMuLan	Read Replies (1) \| Respond to of 12464

FWIW, by RAND Corporation--U.S.–China Relations After Resolution of Taiwan’s Status rand.org

To: RealMuLan who wrote (2229)	10/8/2007 8:02:16 AM
From: Julius Wong	Read Replies (1) \| Respond to of 12464

Myanmar Unrest Raises Risk for Thai Firm Despite Concern Over PTTEP's Links, It May Be Best for Investors to Sit Tight By JAMES HOOKWAY October 8, 2007; Page C11 BANGKOK, Thailand -- With U.S. officials contemplating financial sanctions against those who do business with Myanmar, a question among investors is whether to sell shares in Thai oil and natural-gas company PTT Exploration & Production. The answer: Those risks have increased, but it still may be best to sit tight. The exploration unit of parent company PTT, PTTEP owns a 25% stake in one offshore natural-gas field in Myanmar and 19% in another field in that country. Together, these fields pump around $2 billion of natural gas to Thailand a year, accounting for 40% of Myanmar's exports and placing a sizable chunk of foreign exchange in the hands of the country's generals. Those generals, human-rights activists say, have used it to equip their army and finance the construction of a bunker-like capital in the center of the country. Underscoring the economic ties between Thailand and Myanmar, PTTEP also is prospecting for more natural-gas sites in the waters off Myanmar to help provide for Thailand's future appetite for power. Thailand relies on natural gas pumped from Myanmar to generate one-fifth of its electricity. Thai companies also are investing in hydropower projects in Myanmar to power the Thailand economy. Some analysts caution there could be some risk to PTTEP's share price. Their concern is international sanctions could eventually affect PTTEP's other extraction businesses elsewhere in Asia as well as its operations in Myanmar, or an eventual change in government in Myanmar could harm PTTEP's access to the natural-gas fields it helped develop there. Another concern is Myanmar's military government may nationalize the country's natural-gas fields to maximize the energy revenue they need to prop up their economy. Macquarie Securities calculates that 29% of PTTEP's natural-gas and oil supply comes from foreign reserves -- mostly in Myanmar, Oman and Vietnam. Myanmar accounts for half of those. Kitti Nathisuwan, a Macquarie analyst, said in a recent research report that at worst, PTTEP could lose $1.5 billion in market value if it loses access to natural-gas fields in Myanmar. Given that it has a stock-market value of 444.96 billion baht ($14.13 billion), that would equate to a downside of around 16 baht a share. Friday, PTTEP fell one baht to 133 baht. Macquarie has a 12-month target price of 122 baht on the stock. Mr. Kitti says the concerns surrounding PTTEP's business in Myanmar might persuade some investors to use it as an excuse to sell out of a stock that has risen 22% since Aug. 16, when fears about a global credit crunch were at their worst and international investors cut their exposure to emerging markets, including Thailand. In his report, Mr. Kitti suggests investors may want to switch out of PTTEP and buy into parent PTT, which is separately listed and has a much more diversified range of businesses. PTT's market capitalization of 929.16 billion baht is more than double that of PTTEP. Macquarie sees PTT hitting 327 baht a share over the next 12 months, essentially unchanged from its price of 328 baht Friday. It is up 21% since Aug. 16. Other research houses such as Phatra Securities in Bangkok suggest that PTTEP's recent gains are reason enough to pare back on the stock, regardless of the situation in Myanmar. "We now have a neutral rating on PTTEP," says Ian Gisbourne, strategist at Phatra, which thinks PTTEP already has seen its upside run. More-bullish analysts think the concerns over PTTEP's exposure to Myanmar are overblown, especially as the company expects to bring a new natural-gas field in Thai waters into production next year. Statements from the U.S. and European Union on the need to step up sanctions on Myanmar have done little to dissuade countries such as India, China and South Korea from seeking energy contracts with the Myanmar government. Companies from all three countries are bidding for the right to develop the Shwe natural-gas field off Myanmar's western coast, which suggests they believe there is little to fear from a new round of sanctions. In addition, rising energy prices in the global market suggest that PTTEP may continue to rise faster than the rest of the Thai stock market. Moreover, demand for fuel within Thailand is set to increase as its economy recovers from a turbulent couple of years. The latest data from Thailand suggest the economy is improving ahead of elections set for the end of the year. August exports were up an annualized 18.4% rate to a record $13.82 billion, accelerating from a 6.6% rise in July. Industrial output for the month increased 10.2% compared with 7.5% in July, with improving domestic demand resulting in greater production of electronics, electrical appliances and vehicles. Ampon Kittiampon, the Thai economic-planning agency's secretary-general, early last month said better-than-expected second-quarter data for gross domestic product (GDP was up 4.4% from the same period a year earlier) had fed the agency's view that private consumption, which has been steadily dwindling, has bottomed. Mr. Ampon said private investment would recover and play a larger part in driving economic growth in the second half. Taken together, these factors have nudged Credit Suisse Group to upgrade its target price for PTTEP. The research house's analysts in Bangkok, Paworamon Suvarnataemee and Siriporn Sothikul, have upgraded their 12-month target price on PTTEP by three baht to 171 baht, or 29% above Friday's closing price. online.wsj.com