Chinese state sponsored espionage

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Sept 12, Foreign Affairs Committee press release. (Strongly worded)
As China Seeks to Dominate the South China Sea, We Will Continue to Stand By Our Allies, Ros-Lehtinen Says

http://foreignaffairs.house.gov/news/story/?2595

Hi adam,

I don't think anyone is denying that there IS tension in the South China Sea. The question is does it affect my investment in Soco International? For me, the answer is no. For you, it might be something different. Two different viewpoints - a market, if you will.

Don't know why everything has to get so heated whilst discussing investments!

JS123

In reply to jseth123, post #37

The question is does it affect my investment in Soco International? For me, the answer is no. For you, it might be something different.

Quite so. And if he was really as concerned as he suggests he is then surely the correct course of action is to sell immediately. After all, its not as if he (or anyone else) is going to persuade the Chinese to change course!

However, it seems that he hasn't sold - and yet persistently posts negative repetitions of points that he continues to claim are important but everyone else (more or less) dismisses as relevant. I think actions are speaking far far louder than any words....... ;-)

Surely the right thing for him to do is to sell immediately and move on?

Surprisingly enough it is not at all how Mr EE says.

i have a very large position in Soco, so I am looking to discuss all possible negatives that could be a concern to test whether i have a complacent or jaundiced view. I trust further discussion will not be slammed down by bullies.

In reply to emptyend, post #38

Sometimes it is interesting to go back to source documents on these matters. This is what the Chinese Foreign Ministry had to say last week:

Q: China once said that it would consider discussing the Code of Conduct in the South China Sea (COC) when conditions allowed. According to US Secretary of State Clinton, the time is ripe and hopefully the formulation of the COC will be discussed before the East Asia Summit this November. Does China agree?

A: This year has seen two senior officials' meetings on the implementation of the Declaration on the Conduct of Parties in the South China Sea (DOC) between China and ASEAN countries. All parties agreed to fully and effectively carry out the DOC. We hope all relevant parties can observe earnestly the consensus, enhance mutual trust, promote cooperation, refrain from taking actions that may magnify and complicate the situation and jointly maintain peace and stability in the South China Sea. Meanwhile, we should proceed toward the formulation of the COC in accordance with the principle and spirit of the DOC based on consensus through consultation. China hopes that other countries will respect and support the efforts made by China and ASEAN countries to this end and do more to promote mutual trust and stability.

Q: With regard to the South China Sea issue, did you mean that the US has not done enough to help build trust among countries directly related to the South China Sea dispute? Some Chinese media, including the People's Daily said that the South China Sea issue touched upon China's core interests. Does that reflect the Chinese government's position?

A: On your first question, we noted that the US stated on different occasions that it would not take a position on the sovereignty dispute over the South China Sea. We hope that the US will live up to its words and make more contributions to regional peace and stability, instead of the other way around.

On your second question, the South China Sea issue is complex. Different parties have different understandings and focuses of attention, which automatically lead to different definitions of interests. As for China, the essence of the South China Sea issue is the territorial sovereignty dispute caused by others' invasion of some islands of China's Nansha Islands and overlapping claims to maritime rights and interests in relevant waters . China has the right to defend its territorial and maritime rights and interests as other countries do.

...so...measured and diplomatic language which recognises the complexity of the situation and the overlapping claims for sovereignty. It is a problem that will be sorted out by China and ASEAN - eventually!

Contrast the above quote with the reactions from the same Foreign Ministry source to the Japanese purchase of islands here and in subsequent press conferences.

Anyone interested in looking through the vast amount of detailed spawned by several hundred years of disputes over the Spratleys can find hours of entertainment here. Meanwhile, FWIW, here's the VN case.

....and I repeat again that none of this affects the area in which SOCO International (LON:SIA) operates.

Following adam's "logic" one should have no investments anywhere in Asia, it seems.

In reply to adam, post #39

Surprisingly enough it is not at all how Mr EE says.

Oh really? Which part did I have wrong here then?:

if he was really as concerned as he suggests he is then surely the correct course of action is to sell immediately. After all, its not as if he (or anyone else) is going to persuade the Chinese to change course! However, it seems that he hasn't sold - and yet persistently posts negative repetitions of points that he continues to claim are important but everyone else (more or less) dismisses as (ir)relevant.

i have a very large position in Soco

Uh huh. Please explain why this came about, given your apparent views on the Spratleys and the fact that the basics of the dispute haven't changed in living memory.

ps....please don't continue to be rude - it completely undermines your alleged position.

In reply to emptyend, post #41

Thanks for your earlier reponse EE, which I though (apart from the tetchy tone) quite useful.

Oh really? Which part did I have wrong here then?

if he was really as concerned as he suggests he is then surely the correct course of action is to sell immediately. After all, its not as if he (or anyone else) is going to persuade the Chinese to change course! However, it seems that he hasn't sold - and yet persistently posts negative repetitions of points that he continues to claim are important but everyone else (more or less) dismisses as (ir)relevant.

It really is quite simple. As I have stated, I have a significantly over-weight position in Soco. It's my largest holding. As a professional, full-time investor, I find it less than useful to talk to other stock bulls about how wonderful my favourite stock is, and i'd rather discuss points of concern. The South-Sea Issue concerns me. This does not mean, as you seem to imply, that I should automatically sell because i have a concern. It's a matter of risk weightings. There are pros and cons to every stock. i.e. Should I increase/decrease the country discount? It is perfectly legitimate for me to do so and if you are not concerned or do not wish to add anything constructive to the discussion apart from sniping at me and castigating me, then I suggest you should keep it to yourself.

For the avoidance of doubt. The situation in the SCS has in my view increased the country discount I would apply to Vietnam, hence Soco (as would the recent linked article on the heavy indebtedness of PetroVietnam, to whit their ability to bid). I believe this contributes to some extent to the share price in the market (e.g. trading at a discount to the Conocco Philips transaction value even on historic numbers) and thus could explain, in whole or in part, the discount being applied by investors (further confirming the argument's legitimacy). I think you ought to concede it was wrong of you to suggest that it was "clearly shown to not affect the assets."

In reply to adam, post #42

It really is quite simple. As I have stated, I have a significantly over-weight position in Soco.....This does not mean, as you seem to imply, that I should automatically sell because i have a concern. It's a matter of risk weightings. There are pros and cons to every stock. i.e. Should I increase/decrease the country discount? It is perfectly legitimate for me to do so

This is what puzzles me - and why you obtained the reaction you did (very little of it from me, in point of fact!).

Why on earth would you be "significantly over-weight" in a stock where you are simultaneously evincing concern over some (tangential) macro political factor? .....especially when the fundamentals over which you are evincing concern haven't changed in many decades! It makes no sense whatsoever (hence the general puzzlement over your succession of comments).  If you are really concerned, then surely it is fair comment that you should (or should have already) reduced your position - because, as you say, it is a matter of risk weightings!!

For the avoidance of doubt. The situation in the SCS has in my view increased the country discount I would apply to Vietnam, hence Soco

If that is really the way you see it, then you should certainly be reducing your position - aka selling!

I believe this contributes to some extent to the share price in the market (e.g. trading at a diso#### to the Conocco Philips transaction value even on historic numbers) and thus could explain, in whole or in part, the discount being applied by investors (fruther confirming the arguments legitimacy).

That will teach you to misspell discount ;-)

I believe you are completely and utterly mistaken. You are searching for an explanation of the discount - and there simply isn't one....not one that stacks up in logic anyway. It would appear (from a wide variety of sources) that many in the "street" believe that the management of SOCO will fritter the cashflow away on new ventures rather than return it to shareholders. The only thing that will convince them otherwise (given that management have repeatedly made clear statements on their relative priorities) is the announcement of a big deal that does indeed return the cash to shareholders.

I think you ought to concede it was wrong of you to suggest that it was "clearly shown to not affect the assets."

Absolutely not. There isn't an iota of evidence...not ONE iota of evidence......that the maritime dispute affecting most of the countries in the region has any bearing at all on either the real value of SOCO's assets or the market value of them!  For confirmation, you might wish to investigate whether any of the assets held by Premier Oil (LON:PMO) (which AIUI are actually within the area that might be claimed by China - or certainly border it more closely) have been the subject of that sort of speculative comment?

ee

ps...this is the best map I can find of competing claims and, whilst SOCO International (LON:SIA) 's assets are clearly 250km or so inside undisputed VN waters, Premier Oil (LON:PMO) 's blocks 07/03, Tuna, and Natuna Sea block A all appear to be in an area disputed by two or more of Vietnam, Malaysia, China and Indonesia. Premier Oil (LON:PMO) 's total assets in Vietnam and Indonesia seem to account for roughly half their reserves and production, AFAICT.....so reasonably material - and yet the market seems to pay no attention to the South China Sea debate?

Absolutely not. There isn't an iota of evidence...not ONE iota of evidence......that the maritime dispute affecting most of the countries in the region has any bearing at all on either the real value of SOCO's assets or the market value of them! For confirmation, you might wish to investigate whether any of the assets held by Premier Oil (LON:PMO) (which AIUI are actually within the area that might be claimed by China - or certainly border it more closely) have been the subject of that sort of speculative comment?

I be to differ.

The term "maritime", doesn't fully do justice to the importance of the dispute I think. As the house Foreign Affairs Committee puts it.

“Whoever controls these sea lanes can dominate Asia – and beyond

Also "One-third of all global shipping passes through its waters, as does close to 90 percent of the energy imports to the industrial powerhouses of Japan, China, Korea and Taiwan."

Difficult then to over-estimate the importance of the area to the long term well being of those in the region and indeed the globe. Who comes out top will be critical. Hopefully, there will be a sensible compromise.

Additionally as investors, we are familiar with the concept of optionality, and clearly where there are a number of protagonists involved, both locally and in the wider geopolitical context, the probability for a "policy error" or drunken captain (as did happen) over-stepping the mark and doing something that would escalate things is a real worry. Feelings are running high amonst the populous in China, Vietnam and Japan not least, so weak governments might be required to retaliate to stay in power.

Re: Premier versus Soco. Soco is something of a one-trick pony, which is an extra risk dimension. I don't follow closely, but I understand PMO have recently bought (too) heavily into the Falklands. I would think that they would be vulnerable to events there (as discussed earlier, I don't think Fernadez Argentinian remarrks are taken half as seriously). I don't think therefore the analogy you draw is as strong.

In reply to adam, post #44

The term "maritime", doesn't fully do justice to the importance of the dispute I think.

Most border dispute ARE maritime. It is simply a matter of fact. "Maritime" isn't a synonym for unimportant.

Difficult then to over-estimate the importance of the area to the long term well being of those in the region and indeed the globe. Who comes out top will be critical. Hopefully, there will be a sensible compromise.

Yes indeed. And all parties recognise that - which is why it is a top issue for ASEAN and a continuing focus of diplomacy. However, that will also mean that it won't be resolved quickly - but will probably continue for many more decades yet. But, once again, I have to point out that SOCO's assets are 250km within undisputed Vietnam waters.....you keep inexplicably ignoring that point - but the position is 100% clear in international law ......unlike some areas further towards Malaysia and Indonesia.

the probability for a "policy error" or drunken captain (as did happen) over-stepping the mark and doing something that would escalate things is a real worry.

I think you worry far too easily (well, very much far too easily for someone who claims a big position :-)).

It would be a real worry if this was a pure bliateral dispute about which nobody else cared a jot - but it isn't. There are half a dozen countries directly involved and dozens more with a legitimate interest in a sensible outcome....as you note yourself: there are a number of protagonists involved, both locally and in the wider geopolitical context .....and it is the very multiplicity of these actors that will ensure that the situation develops very slowly, as there are an absolute stack of checks and balances on the actions of every party!

Re: Premier versus Soco. Soco is something of a one-trick pony, which is an extra risk dimension. I don't follow closely, but I understand PMO have recently bought (too) heavily into the Falklands. I would think that they would be vulnerable to events there (as discussed earlier, I don't think Fernadez Argentinian remarrks are taken half as seriously). I don't think therefore the analogy you draw is as strong.

If you think of SOCO as a "one-trick pony" why do you (claim to) have a large overweight position? If that is an extra risk dimension, then why haven't you trimmed your position accordingly? You did notice my closing comment in the previous post before you rushed to conclude my PMO analogy wasn't strong, didn't you?......

this is the best map I can find of competing claims and, whilst SOCO International (LON:SIA) 's assets are clearly 250km or so inside undisputed VN waters, Premier Oil (LON:PMO) 's blocks 07/03, Tuna, and Natuna Sea block A all appear to be in an area disputed by two or more of Vietnam, Malaysia, China and Indonesia. Premier Oil (LON:PMO) 's total assets in Vietnam and Indonesia seem to account for roughly half their reserves and production, AFAICT.....so reasonably material - and yet the market seems to pay no attention to the South China Sea debate?

50% of assets/production in or near disputed areas in the South China Sea? Plus new project risk in the Falklands/Malvinas? And yet you seem to think SOCO shareholders should worry more, despite having 100% of assets in undisputed territory?

I'm sorry. Despite your protestations, this seems to me to be clearly a pointless wind-up, so you'll have to find someone else to play with.

ee

In reply to emptyend, post #45

I would like to thank Adam for raising this thread - as a result of the debate any uncertainties I had about the issue have been dispelled and I feel reassured................ ;)    (Not sure that was his intention?)

Redhill

ps Not so sure about Premier though................

In reply to emptyend, post #45

Thanks for your opinions. I'm not going to rise to the bait on the personal attacks. I wish to address this one point

If you think of SOCO as a "one-trick pony" why do you (claim to) have a large overweight position? If that is an extra risk dimension, then why haven't you trimmed your position accordingly?

I'm sure you are not being intentionally obtuse, but clearly a risk factor is price dependent. There are by definition two sides to the equation, the risk and the reward.

If Soco was £6+/share I would be on-balance a seller. It isn't, it is £3.30 so the one-trick-pony aspect (at least in terms of maturity/production) is not something to be taken in isolation. I thought, mistakenly, that would be taken as read.

I think you worry far too easily (well, very much far too easily for someone who claims a big position :-)).

The bigger the position the more I worry. As Mark Twain said....

“It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so.”

I have to point out that SOCO's assets are 250km within undisputed Vietnam waters.

 

I tried to overlay a map on Google Earth and guestimated it was somewhat less, especially as China was issuing blocks within the EEZ. However this wasn't the point, which is something you seem to continue to ignore.

you seem to think SOCO shareholders should worry more

I wish you wouldn't put words into my mouth. I never said that. I said I have not made the comparison as I do not follow Premier Oil (LON:PMO) closely. I have no firm view on whether PMO is better risked or not.

Hi adam,

You've told us that you have a v large position in SIA ( #39) and then that it is in fact your largest shareholding (#42).

As other posters have remarked, China's territorial ambitions/claims are nothing new, which begs the question : were you unaware of these at the time (s) you built up your position....and perhaps suffering buyer's remorse now ? Or were you aware , but discounted at the time ?

You've quoted Twain ' sure things that ain't necessarily so'...perhaps this is more of a Rumsfeldian moment (*' an unknown unknown") ?

Either way, having had your Damascene moment, what do you yourself propose DOING about your apparently overweight position - beyond asking a largely anonymous bulletin board for their suggestions/input ? And why this board as a newbie, rather than your long-standing contacts/'known' counterparts on TMF and/or elsewhere ?

Good luck, whatever you decide.

ATB

In reply to extrader, post #48

were you unaware of these at the time (s) you built up your position.

First bought at 76p in Feb 2000.

See my previous post for answers to your other questions

Good luck, whatever you decide

 

You too.

http://www.businessweek.com/news/2012-09-24/soco-chief-considering-vietnam-oil-projects-in-disputed-waters

“There are particular basins in deeper water offshore Vietnam that we think have very significant potential and could change the production decline rate,” Story said. “Some of them are in the claim areas,” he said, referring to parts of the South China Sea claimed by both Vietnam and China.

 

That statement does not seem consistent with a near term takeover, or medium term either as would amount to a poison pill. I don't understand the logic behind this.

Well I don't see a logical problem with this. Sure they might offload the vietnamese assets at some point soon, or the whole company. There is no point them sitting back not finding new opportunities in the meantime. These assets could either be sold with sv, or kept in a son of soco. Buying access to some assets while the price is low due to uncertainty, sounds like a punt. The management will only take that punt, if they see the risk reward as favourable. At some point some deal may well be done between china, Vietnam, japan et and if they happen too be holding winning cards after that deal, then perhaps it'll be worth more. Even if they aren't perhaps some sort of accomodation will be found that respects the licences issued, vietnam hands over any monies paid for the licences and royalties paid to china instead of vietnam ??

We'll see, these assets are obviously much higher risk than tgt or cnv, but lets see how things pan out.
they might just be potential upside for a buyer, or they might be something that increases in value if a resolution to the dispute is found,

I am certainly not in favour of the management not exploring new opportunities. If they decide to announce a sale and bring the situation to a head fine. If they want to keep developing tgt, prove up connectivity, and H5 fine too, but why not try to do other deals too ? If they go that route, by the time they've drilled H5 we might know something more about DRC, which might be a discovery by then, and might form part of a son of soco with any other promising acarage.

K

In reply to kenobi, post #51

Any chance we could keep discussion in one place on this? The thread on Vietnam Assets seems most appropriate as there have already been a number of posts on this topic today.

In reply to Fangorn, post #20

Hello Fangorn

1. The noun is "fallacy".
2. Try to make numbers agree - "use big words...spell it correctly" doesn't make sense.
3. Unlike number disagreement, missing one letter from a long word is probably just a typo.

Have you considered getting help? You might like to try talking to these people:

http://www.angermanage.co.uk/

Hello gormless george.

I must say you've taken an awfully long time to pull me up on my indiscretions....any reason for the sudden interest - you wouldn't be that moronic pleb called Jon827 on Advfn now would you that threatened to stalk me yesterday?

Rest assured, you're in for a very dull stalking.

Enjoy your weekend.