UBS sees resources sector leading China M&A

BEIJING/HONG KONG Wed Dec 15, 2010 4:37am EST

BEIJING/HONG KONG (Reuters) - China's natural resources sector will likely lead overseas acquisitions, a UBS executive said on Wednesday, due to the country's insatiable appetite for commodities as it boosts consumption.

The agricultural sector, such as fertilizers and soft commodities, might also see more acquisitions, Philip Partnow, UBS's chief of China M&A and deputy head of investment banking, told reporters at the Reuters China Investment Summit.

"The outbound acquisition story is still at a very early stage in China," said Partnow, who is based in Beijing. "I continue to believe that it's going to be natural resources leading the charge."

UBS is ranked No. 5 on announced China M&A deals in the year to date, rising from 11th in the same period last year, according to Thomson Reuters data.

The Swiss bank has been involved in 11 deals worth $7.26 billion in the category of any Chinese involvement, excluding carve-outs and open market repurchases.

Most outbound acquisitions by China's oil companies this year have been in riskier areas such as Africa or in locations with aging assets.

The 10 deals so far this year for China's oil and gas companies have been worth $18.6 billion, already eclipsing the $15.8 billion in deals for all of 2009, according to Thomson Reuters data.

The bank has also become well known for its IPO underwriting prowess in Asia, having led the region's league tables for the last five years in equity capital markets deals.

Unlike other foreign banks, UBS has a full securities license through its China joint venture, allowing the bank to underwrite and settle A-share stock offerings.

In Hong Kong, IPO activity has been brisk, with the Chinese territory seeing some mega deals this year, such as the listings of Agricultural Bank of China (1288.HK) and AIA (1299.HK).

But over the past few months, some companies have scrapped IPOs in Hong Kong, such as the third-biggest Chinese wind company, Huaneng Renewables, which canceled its $1.3 billion IPO due to a weak Hong Kong market.

Partnow said that trend could continue over the next few months in Hong Kong and China since investors would still be trying to determine where the mainland's macro policy is headed, having to balance economic growth and contain inflation.

"Given all of that uncertainty out there, the trading activity in the capital market is very choppy and that impacts the ability to get IPOs done."

(Additional reporting by Don Durfee, Charlie Zhu and Terril Yue Jones in BEIJING, and Michelle Chen in HONG KONG; Writing by Michael Flaherty; Editing by Ken Wills)