Citic rumours buoy shares

By PAULA OLIVER forestry writer

Strong trading in Fletcher Forests shares yesterday was directly linked to news that former partner Citic is preparing to go shopping - and that a local forest is on its list - analysts said.

Fletcher Forests shares sparked back into action, rising 2c after information hit the market that Chinese Government-owned Citic Pacific was going to the bond market to raise $US500 million ($1.2 billion). Speculation centred on Citic's using the funds raised to buy either the Central North Island Forestry Partnership's assets, or Fletcher Forests itself.

Citic partnered with Fletcher Forests in the failed Central North Island Forestry Partnership, which fell into receivership in February. Receiver Michael Stiassny has indicated that the assets of the partnership - which include the giant Kaingaroa plantation - will go out to international tender shortly.

Fletcher Forests bosses have expressed interest in making a bid, but analysts have been quick to say Citic should not be ruled out as a potential buyer. China is in need of resources, one analyst said, so it is likely to be keen to secure the sustainably managed forest.

"The news of the bond move is perhaps not that significant, but the market has been so starved of news on Fletcher Forests and the receivership that it reacted," Arthur Lim, of JP Morgan said.

The amount raised by Citic - $1.2 billion - would give it considerable firepower at the negotiating table, Mr Lim said.

ABN Amro's Nigel Scott said yesterday's lift in trading was clearly linked to the Citic news.

Buying the partnership's assets would be a cleaner transaction than trying to buy Fletcher Forests itself, analysts agreed. A move on Forests would be more complicated because Credit Suisse First Boston and Fletcher offshoot Rubicon, which each hold stakes in Forests, would become involved.