HK jewellery giant branches into 'black gold'

[BEIJING] Hong Kong-based Chow Tai Fook group, owner of the world's biggest jewellery company, is making an unlikely foray into China's oil trading business, according to several traders recruited by the group.

China's state-controlled oil sector is subject to heavy restrictions, but independent companies are expecting Beijing to lift at least some of the barriers this year, and family-controlled Chow Tai Fook has already prepared the ground to take advantage of the opportunities.

The group, which also has a large property business, set up Chow Tai Fook Energy Co Ltd last July, the traders said, and Gao Jianfeng, a former trading manager for Chinese oil and gas giant Sinopec Corp, said he had been appointed as its president.

China-based oil traders said the jewellery maker had been looking at diversifying into the oil business for some time, but the decision to launch a trading operation may have been prompted by a slowdown in its core activities.

Company traders declined to comment on the move into oil.

Its China-centric Chow Tai Fook Jewellery business, which has a market value of around HK$102 billion (S$17.5 billion), posted a 10 per cent drop in sales in its most recent quarter and is expecting the current quarter to be weak, too.

A slowing Chinese real estate market has also clipped cash flow for its property arm, New World Development, worth just over HK$83 billion.

The company is not alone in gearing up for the opening up of China's oil markets; traders told Reuters this week that CEFC China Energy, a small chemicals and fuel company, is also beefing up its oil business in readiness.

Like CEFC, Chow Tai Fook could be looking to obtain a permit from Beijing authorities to import crude oil into China, senior China-based oil traders said, though the fact it does not own oil and gas producing assets could prove an obstacle.

In the meantime, it could start by acting as a regional trader or a supplier in China, they said.

Company traders said Chow Tai Fook Energy has already opened a Beijing operation, led by Zhou Xuan, another former Sinopec trader. The company has also registered a Singapore operation, led by James Goh, a seasoned Singapore-based crude oil trader formerly with Astra Transcor Petroleum.

Goh and Zhou confirmed their appointments.

It will soon set up London and Houston outlets.

Beijing hopes market-based reforms will make the energy sector more efficient, and the involvement of independents would also help make a success of its launch of oil futures in Shanghai.

Henry Cheng Kar Shun, head of the family's business interests, is a member of the Chinese People's Political Consultative Conference (CPCCC), an advisory body to parliament.

His office declined to comment on this story.


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