China Oil Stock Down

Shares in Chinese oil companies have fallen on the Hong Kong stock market after British oil major BP sold off its holdings in PetroChina -- the nation's largest oil company -- to cash in US $ 1.65 billion. BP, however, has no plan to sell off its holdings in other oil companies including Sinopec -- the nation's second largest oil firm, and Zhenhai Refining & Chemical -- a refinery unit of Sinopec, according to Daniel Teo, vice-president of BP China.

Investors are worried that the sell-off may trigger other strategic shareholders including Royal Dutch/Shell and ExxonMobil to reduce their stakes in Sinopec -- the second largest domestic oil firm. Sinopec's shares have already reached a historical high, and almost tripled over the prices the foreign companies bought. BP, the world's third-largest oil company, on January 13 concluded the sale of its 2 percent stake in PetroChina at HK$ 3.70 (47.4 US cents) a share to raise HK$ 13 billion (US $ 1.65 billion). Responding to the news, shares of PetroChina lost 2.48 percent to end at HK$ 3.9 (50 US cents) on January 13 with the lowest dropping nearly 5 percent. The stock had fallen 17 percent in the past five sessions, spurred by rumors of the share sale. "It is not a surprise for BP to sell off the holdings. BP wanted to sell it for quite a long time,"said an analyst with a Hong Kong-based Investment Bank. "They want to sell any non-core assets."

Royal Dutch/Shell refused to comment on whether it will follow BP's move. Teo said BP retains good relations with PetroChina, and committed to its business with other partners in China. Analysts agreed that the impact of the sell-off will not last long. But they are divided over the outlook on the Chinese oil companies. "In the short-term, it is on the down-turn trend as investors worry whether others will follow," said the Hong Kong analyst. "In the long-term, we don't recommend it because they are overvalued... The high oil price already lasted longer than expected. It will be on the downturn."