U.S. News

Fidelity Cuts PetroChina ADR Holdings by 91%


Fidelity Investments, the world's No.1 mutual fund company, has cut its exposure to PetroChina following pressure by human rights groups over the Chinese oil firm's links to Sudan.

In a regulatory filing on Tuesday, Fidelity said it had cut its holding of PetroChina American Depositary Receipts (ADRs) by 91% in the first quarter of 2007.

Fidelity and Warren Buffett's Berkshire Hathaway, another big PetroChina shareholder, have been targeted by human rights groups to divest their stakes in Asia's top oil and gas producer because of the Chinese company's alleged ties to genocide in Sudan.

The groups, including the Save Darfur Coalition, the Sudan Divestment Task Force and Fidelity out of Sudan, as well as actress Mia Farrow, are now running an advertising campaign on major media outlets targeting Fidelity and Berkshire.

John Bonnanzio, editor of independent newsletter Fidelity Insight, said the cut in the holdings appeared to show that Fidelity had "buckled to the mounting political pressure." "If you look at Fidelity's position in PetroChina in terms of its total assets under management, it's insignificant. And the upside to the firm is minimal in dollar terms than the downside to them in political terms," Bonnanzio said.

Fidelity's 69-page filing showed it owned 420,916 ADRs of PetroChina as of March 31, compared with about 4.5 million ADRs as of end-December. 

A Fidelity spokesman declined to comment about the reason for the reduction in PetroChina holdings. The Boston-based fund company had previously countered criticism of its PetroChina investments by saying it was complying with all laws governing investments in Sudan.

The Save Darfur Coalition welcomed the news of Fidelity's cut in exposure to PetroChina, but said there was still a question mark regarding Fidelity's ownership of PetroChina stock listed in Hong Kong.

Fidelity, which is  required only to detail its ADR holdings in the 13F filing, declined to comment on its Hong Kong holdings of PetroChina. "Our initial impression is that our divestment efforts have been fully justified," said Allyn Brooks-LaSure, director of media relations at the Save
Darfur Coalition.

PetroChina shares, which fell 16% in the first quarter of 2007, have recovered somewhat since the end of the quarter and closed at HK$10.06 on Tuesday.