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Last Updated: Sunday, 5 February 2006, 18:32 GMT
Fear and greed makes Global 30 jumpy

By Jamie Robertson
BBC World business presenter

Yang Hua, executive director and executive vice president of China National Offshore Oil Corporation (CNOOC)
CNOOC is determined to become a global player

The first month of 2006 managed to produce fear and greed in the global stock markets in fairly equal proportions.

That sent the Global 30 index of the world's biggest companies up to record highs and then dropping it in a few nerve-jangling falls that had everyone talking about crashes, slumps and bear markets.

But after all the sound and fury, January ended with the index up - just - 6.7 points.

One of the features of the month was another hike in the oil price caused by the stand off between Russia and Ukraine over gas supplies, the taking of hostages from Niger delta oil installations and the increasing tensions in Iran over its nuclear ambitions.

Predictably, this all benefited the share prices of BP (up 8.5%), Exxon (up 8.3%) and BHP Billiton (up 12.9%), which was also helped by sky-high prices for copper, zinc and other raw materials.

But China National Offshore Oil Corporation (CNOOC) did best of all, rising 21.1%.

There are more than good profits in this figure.

Last year it failed to buy the Californian oil group Unocal but it has shown itself determined to be a player on the world stage: January saw it announce that it would be increasing production 7%, upping capital expenditure by 35% and exploration spending by 72%.

It has bought a Nigerian oil field for $2.27bn (1.28bn), and may now try to make a similar purchase of Kazakhstan assets from the Canadian group Nation's Energy.

However, its relationship with India's ONGC oil group is attracting attention, with debate over whether it will ally itself with its traditional rival or compete against it in a race for offshore assets.

Couch potatoes

The other big feature of the month was the brouhaha over Livedoor, the Japanese internet company that fell from grace following a raid on its offices by fraud investigators.

traders

It was compounded by poor results from Intel and Yahoo in the US giving everyone the chance to pile out of the market.

What perhaps was more alarming was the inability of the Tokyo Exchange to cope with the volume of trade which forced it to close early on Wednesday and for several days after.

Now the dust has cleared it is interesting to see that Asian technology companies ended the month on a positive note.

NTT DoCoMo, which has a small stake in Livedoor, ended up 3.1%, and Samsung Electronics rose 14.2%.

Samsung now has a market capitalisation over $100bn, making it one of only four Asian companies valued above that level, a sum roughly equivalent to Pakistan's GDP.

According to Samsung, prospects for the rest of the year depend on how many couch potatoes will buy, and then flop down in front of, flat screen TVs showing 64 games of World Cup Football (around 500 million per match apparently) and the Torino Winter Olympics in Italy.

However, other companies which one might imagine to be unaffected by the Livedoor debacle failed to recover from the sell-off.

Seven & I Holdings which owns Ito-Yokado supermarkets, Denny's restaurants and Seven-Eleven fell almost 10% on the day of the collapse and ended the month down 6.3%.

That is despite robust signs of a real recovery in the Japanese retail sector.

Robust is not a word to describe the US retail scene: US chain Wal-Mart reported the worst growth in December sales in five years.

Its shares tumbled 7.3% in January.

American blues

The bottom of the Global 30 Index was dominated by US companies: the big disaster of the month was the set of fourth quarter results from chemical group Du Pont, showing a 64% fall.

Wal-Mart store
Wal-Mart had a mixed year in 2005

Hurricanes Katrina and Rita had a lot to answer for, as did high energy costs.

But what really worried the markets was that the profit figure of 10 cents a share was half what the company forecast in October - after the hurricanes and when the oil price problems should have been fully factored in.

Dupont shares fell 11.6% on the month.

Investors have also been deserting General Electric (down 9.6%) after it failed to win a bid to buy Westinghouse Electric from British Nuclear Fuels.

Toshiba looks certain to get it instead - and with it, it's thought, some very juicy nuclear plant contracts in Asia, and in particular in China.

(Incidentally BNFL is likely to sell Westinghouse for $5bn - four times what it bought it for in 1999).

In addition GE's results (profit growth of 1% on the quarter) under whelmed the market, as it struggled against a relatively strong dollar and shrinking volumes.

Not all bad

Citigroup's quarterly results didn't shine much either - profits fell 3% and the shares were down 6.9% on the month. Ominously the problems here were surging defaults on credit cards at its consumer business.

However there was also news that Citigroup was the preferred bidder for a controlling stake in Guangdong Development Bank: the deal would be significant in that it would mean an end to Chinese 20% restrictions on foreign ownership of banks.

(Less credible was a report in a New York magazine that the bank was poised to buy Goldman Sachs, something that Goldman described as "absurd".)

A change in the rules in China may benefit HSBC (down 0.2%) which, according to Hong Kong's Sing Tao Daily, may be allowed to increase its 20% stake in Bank of Communications, the country's fifth biggest lender, which it bought in 2004.

The US wasn't all bad news.

The final rubber stamping of the telecoms group Verizon's purchase of MCI took an unexpected twist.

Verizon is now claiming the deal will add $8bn rather than $7bn in new sales and savings, as it hacks out redundancies at a more furious rate that it imagined last year: more crucially though, MCI has brought with it an impressive customer list, including Airbus, and at a stroke turns Verizon into an international rather than regional player in high speed internet access.

Verizon shares rose 7.6%, but would have done better still had not there been rampant speculation that Vodafone wanted to sell off its 45% stake.

As for Vodafone itself, it fell 6.5%, despite news that its subscriber base is rising faster than expected: the market is more worried by the rate of slow down in revenue growth this year and next as it reaches saturation in western markets, struggles to compete in developing markets and fights to produce innovations to tempt old customers to buy new products.


BBC Global 30 intraday chart
value
change
%
5707.15
20.65
up
0.36

MARKET DATA - 11:37 UK

FTSE 100
5428.78up
22.84 0.42%
Dax
5732.06up
18.55 0.32%
Cac 40
3783.91up
14.37 0.38%
Dow Jones
10403.79up
78.53 0.76%
Nasdaq
2273.57up
35.31 1.58%
Data delayed by at least 15 minutes

SEE ALSO:
Dollar strength boosts Global 30
02 Dec 05 |  Business



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