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Stocks from Down Under

21 September 2007 - Features - Editor

Exceptional natural resources have always been a beguiling attraction of Australia, right from the 17th century colonization of the continent. The industrial development of this part of the world has been substantially based on its wealth of minerals and fossil fuels, and stocks of companies in these sectors have performed better than others for years. Discoveries of natural wealth in the territorial waters of Australia have boosted the stocks of domestic companies in recent times. The country has emerged as a leader in the sustainable exploitation of the sea-bed, and has stolen a march on its larger peers in this respect.

Australians have traditionally combined national development aims with environment conservation concerns, so the substitution of fossil fuels with energy forms such as natural gas have always occupied executive minds at the highest levels. The country has also made a habit of exporting products of its natural resources to other countries, and has achieved leadership positions in many related fields. Overall, the judicious exploitation of natural resources is a common factor in most of the successful and attractive stocks quoted on Australian Exchanges. Australian companies and affiliates of global corporations in the country can serve as a model for commercial ventures in all emerging economies.

Global Prospects for Energy Stocks

Consider, if you think that China is too far away from Australia’s marine gas fields that Australian branches of international energy corporations first visited the United States way back in 2003. Some investors may be surprised to learn that it is economically feasible to ship natural gas all the way across the Pacific. The Gorgon reserves, off the coast of Australia, represent a significant natural resource for the country, which puts it in the vanguard of the world’s future energy supplies. Natural gas has more than energy implications: fossil fuels have dominated geo-politics for decades, and natural gas is an important step towards controlling polluting emissions as well. The development of bulk ocean going carriers with terminals near major consuming centers, acts as an entry barrier for late and small entrants in this profitable field. Stocks of companies with such reserves, and with infrastructure in place, therefore have superior business prospects.

The Unique Role of China in World Energy Stocks

China’s demand for all energy products and services is truly insatiable. China is aware that its own terrestrial and off shore reserves could prove inadequate to meet demand, though it leaves no stone unturned to exploit its resources as fully as possible. It therefore agrees to relatively extravagant terms in securing contracts from overseas suppliers. Experts estimate that a third of all natural gas in the country will be imported, well in to the first half of the current century. Chinese arrangements with Australia in this respect help both countries, and add to the profit and appreciation potentials of private corporations involved. Stocks of companies with such supply contracts have unbeatable advantages in terms of assured revenue streams for decades. China is believed to be willing to pay premiums for energy supplies which are not US dependant. This adds to the values of Australian companies with Chinese energy supply arrangements.

US corporations and China have been wary of each other in negotiating past energy supply agreements. Australian entities, including the country’s affiliates of global corporations, have struck a new chord, going to the extent of encouraging direct Chinese investments in their infrastructure and exploration projects. The emerging scenario has strategic implications for investors due to the superior and stable prospects for steady returns. Find ways to get stocks from this segment of the world economy, even if you are not fortunate enough to be an Australian or a Chinese citizen!

How Top International Stocks Add Values to China’s Future

Though China remains an enigma if not an outright adversary for many traditionalists from the first world, top global corporations have shored their stocks by developing excellent foundations in the country. In fact, such corporate initiatives act as bridges between China and the rest of the world, and help in building new forms of global cooperation for global benefits.

Shell, which has a large hand in energy exports from Australia, also has a substantial and most widely appreciated presence in China. A corporation of this stature needs no introduction to investors anywhere, but a study of the corporation’s activities in China will serve as an object lesson in how the world of business can play a meaningful role in international relations between countries. Shell has not just arranged natural gas supplies for China from Australia, but is active in helping the Beijing government exploit its own energy reserves, and improving environmental protection standards in the country as well. This kind of globally-coordinated approach adds tremendously to the values of the company’s stocks wherever they are listed.

 


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