Chinese on the sidelines as Communist Party gabfest looms

The Communist Party’s 19th National Congress opens in Beijing on October 18 and deal-makers in Australia say interest from mainland Chinese buyers in local assets has fallen in the past few months.

The big sales like Lattice, Laser Clinics Australia and
I-MED Radiology would in the past have attracted a number of Chinese names. Deals in the healthcare sector are popular.

But mainland China has ground to a halt ahead of the five-yearly political meeting, and the authorities there have started to pay extra attention to international investment.

A new set of rules governing Chinese companies buying assets offshore has clamped down on some investments like cinemas and entertainment, and firms have been told to stick to their own industries.

However, resources has been given the unofficial green light, and as a result bankers in Australia report interest in some assets, especially in the gas industry.

Guangshan Group has become keen on WA gasfields and Pilot Energy recently welcomed GS Energy as a new investor with 23 per cent.

GS Energy is a South Korea-based investment conglomerate but there is talk that Chinese investors make up a big portion of Pilot Energy’s backers.

On a larger scale, AGL last month sold its half-share in the Moranbah gas project to Shandong Order Gas company for what bankers say was an insignificant sum.

AGL had already written down the value of the project and was keen to exit after a lengthy sales process.

In June, Chinese billionaire Wang Yusuo and his company ENN took a 10.3 per cent stake in Santos while Hony Capital, also Chinese, took 4.8 per cent.

Fosun had been touted at a potential buyer of Lattice Energy and Shell New Zealand but that prospect has now been discounted. The rush of investment has naturally prompted questions about which companies are next, and many are questioning the reasons for the fresh focus from the Chinese.

Bankers say Cooper Energy, AWE and Senex are being talked about as potentially the next natural targets.

Some deal-makers think the Chinese are keen to snap up Australian assets to essentially learn more about gas production to take part in the boom in the mainland gas market.

Earlier this year it was predicted that China’s gas production would rise by nearly 25 per cent in 2017 compared to last year, with at least 170 billion cubic metres due to be produced this year.