June 20, 2014, 11:40 A.M. ET Vietnam Slumps: Second Chinese Oil Rig, Oversold?
By Shuli Ren: The Market Vectors Vietnam ETF (VNM) has lost 4.1% in the last two trading days after a high-level talk between China and Vietnam earlier this week resulted in only pretty words from diplomats, and after China deployed a second oil rig to the South China Sea near the Vietnam border. In early May, Vietnam’s coastal guard clashed with Chinese military and civilian ships over an oil rig China’s CNOOC (CEO) had built in waters claimed by both countries, sending the Market Vectors ETF slumping by 4.1%. We asked then if it presented a good bargain hunting opportunity and the Vietnam ETF did recover over 10% since the early May low – before the most recent round of sell-off began. So is this sell-off a second chance to buy? Wall Street Journal‘s China Real Time blog seems to think so: The movement of at least four Chinese drilling rigs in the South China Sea in the last couple of days isn’t necessarily alarming given the frequency of rig movement in the region in the past. The rigs’ locations are also nowhere near disputed waters, and there are no accompanying coast guard vessels for these rigs. Data from consulting firm IHS shows that China has 16 drilling rigs in that portion of the South China Sea, most of which are small jack-up rigs, and four are semi-submersible rigs. “The rig movement in itself doesn’t seem massively controversial. It’s too early to draw any conclusion that China is using the rigs as chess pieces against the Vietnamese,” Gary Li, senior maritime analyst at IHS said.
DNA Price at posting:
83.5¢ Sentiment: None Disclosure: Unspecified
