CGV defies market rout: Robin BrombyFont Size: Decrease Robin...

CGV defies market rout: Robin BrombyFont Size:
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Robin Bromby | November 02, 2009
Article from: The Australian
IF we were still in the headline writing business, today¿s might be: ¿Small share market retreat - not many hurt¿.

A quick sweep around the chat rooms, where the traders of the penny dreadfuls post their opinions, shows only modest alarm at the market’s decline this morning after the blow out at the corner of Wall and Broad on Friday night.

There are, in fact, many comments along the lines that the market might bounce well off its lows as we move into afternoon trading.

We’ll see whether this retreat is just a one-day wonder. However, if Wall Street can’t manage a plausible bounce tonight then we might see a bit more pessimism creeping in.

A check on junior stock prices this morning also fails to show anything alarming. Most are down, true, but not by unexpected percentages. What you can see, however, is many of the lesser traded stocks becoming increasingly illiquid - and that could be a worry for investors locked into them. And that means trading positions becoming long-term "investments".

But there was plenty of liquidity - and bounce - in the shares of Clean Global Energy (CGV) this morning. It’s the China and global warming stories neatly wrapped in one parcel. Underground coal gasification is one of the coming technologies and CGV has entered a $US400 million ($444m) joint venture with Inner Mongolia Gu Xin Mining Co.

The two will set up a Hong Kong-based company and have an off-take agreement with Inner Mongolia Sukli Oil & Gas for the supply of up to 420 million cubic feet a day of Syngas.

Energy - and clean energy, particularly - is one of the more persuasive stories on the investment front at present with the developing economies still expanding apace. China, the world's third-largest economy, is the second-largest consumer of oil at 8.2 million barrels a day, behind only the US at 18.4 million barrels a day.

A Chinese company is now trying to buy drilling leases in the Gulf of Mexico. It is a fast moving story. But, as with any project, nothing is 100 per cent certain until the first gas starts flowing and gets paid for.

The writer implies no investment recommendation and this report contains material that is speculative in nature. Investors should seek professional investment advice. The writer does not own shares in any of the companies mentioned.