UPDATE 1-Berkshire's Buffett says China is too hot to buy
DALIAN, China Oct 24 (Reuters) - Berkshire Hathaway Inc's Warren Buffett said on Wednesday he is scouring the world for big businesses, but is doubtful about finding a good buy in China because the market is too hot.
Hong Kong-listed shares in mainland companies .HSCE have risen 89 percent so far this year, while the main Shanghai index .SSEC has surged more than two-fold in 2007 and has jumped five-fold since the start of last year.
Buffett, speaking to reporters at the opening of a factory owned by an Israeli company he controls, had been asked about Berkshire's investment in PetroChina Co Ltd (0857.HK) (PTR.N), the country's largest oil and gas producer.
Buffett said last week that Berkshire (BRKa.N) (BRKb.N) had sold its entire stake in PetroChina, netting a huge profit for the insurance and investment company.
"It was a very easy decision to buy PetroChina. It was one-third of what it was worth, maybe a quarter. I doubt in the present market I would find something like that. The market has been too hot. I will keep looking," he said.
Berkshire at one point had a stake of 11 percent in PetroChina. The shares were worth $3.31 billion at the end of 2006, well above the $488 million that Berkshire paid for them, according to Berkshire's latest annual report.
Buffett said he had written to PetroChina Chairman Jiang Jiemin on Tuesday, thanking him for the "terrific" job he and his managers had done for shareholders.
Buffett said last week he had sold on valuation grounds, not because of criticism that PetroChina, through its government-owned parent China National Petroleum Corp, is too closely linked to Sudan.
The Sudanese government has been blamed for what the White House has called genocide in the Darfur region.
NOT ON OUR RADAR
Buffett has long lamented his inability to deploy Berkshire's cash hoard, which totalled $47 billion at the end of June. The Omaha, Nebraska-based company owns more than 70 businesses and has some $100 billion of stock and bond investments.
Buffett specifically denied that Berkshire was interested in buying shares in China Life Insurance Co (2628.HK)(601628.SS).
"There was a rumour, and that is not true. We don't have anything against it. It just wasn't on our radar screen," he said.
Because of Berkshire's huge market capitalisation, any acquisition would have to be big to make an impact on the company, he said.
Buffett sidestepped a question about what advice he would give to Chinese stock market investors but was happy to restate his personal investment philosophy. He said he was hunting for well-managed companies in sectors that he understood with an eye to investing for 5, 10 or 20 years.
"We cannot dance in and out of businesses," he said.
He said he did not mind taking a big bet on a familiar business. "Diversification is a protection against ignorance," he said. "If you understand the business and buy at attractive prices, there really isn't much risk."
Turning to the meltdown in the U.S. market for subprime mortgages, Buffett said: "Subprime is a real problem, but there are always problems. But we will get through it. How much pain it will produce, I don't know. It will be significant."
Buffett was speaking at the opening of a factory owned by Israel's Iscar International Metalworking Cos, in which Berkshire has an 80 percent stake. (US$=7.4931 yuan)