Investors cheer easing of Cuba curbs
TORONTO/NEW YORK |
TORONTO/NEW YORK (Reuters) - Investors in companies with Cuban assets, or the potential to expand into the country, cheered on Monday after the White House said it would ease some of the restrictions it has imposed on the Communist-run island.
Shares of one of the island's large players, Canada's Sherritt (S.TO), surged, as the mining and energy company has assets in Cuba it may choose to monetize. Cruise ship operator Royal Caribbean (RCL.N) and rival Carnival Corp (CCL.N) also closed higher as investors bet the Obama administration's move would eventually pave the way for more extensive travel.
The White House said it will allow U.S. telecommunications companies to seek licenses in Cuba, a move that could open up a new and largely untapped market for U.S. operators, which are facing slowing growth at home.
But shares of the major U.S. telecommunications companies failed to react as analysts voiced skepticism about Cuba opening up its telecom markets.
The announcement signaled a change in Washington's attitude toward Cuba and raised hopes that the U.S. government might take further steps and even lift its trade embargo on Cuba. It follows a long history of U.S. sanctions against Cuba after Fidel Castro took power on January 1, 1959.
News of the eased restrictions on U.S. telecommunications companies sent Sherritt shares soaring on hopes that the U.S. might make similar concessions for companies in the energy and mining sectors. Sherritt's stock closed up 24.5 percent.
"Every time (there's been a rumor) that (Fidel) Castro has died, which has been half a dozen times in the last 10 or 15 years, Sherritt's shares go up about 3 percent, so clearly the market thinks that an easing of U.S. restrictions on Cuba is good for Sherritt," said Salman Partners analyst Raymond Goldie.
"What's backing that up is ... that Sherritt may find buyers for some of their Cuban assets, particularly the oil and gas ones," added Goldie.
Fidel Castro was president of Cuba until last year, when poor health forced him to cede power to his brother Raul.
The easing of travel restrictions boosted the shares of cruise operators as investors bet the measure would eventually pave the way for their ships to dock in Cuban ports.
The travel industry has long seen Cuba, just 90 miles from the United States, as an ideal destination for American tourists. A Cuban port could breathe new life into the Caribbean -- the largest market for both Carnival and Royal Caribbean, which sail to the Bahamas, Jamaica and Puerto Rico.
"There hasn't been much new in the Caribbean markets so you can add it as something new to make it more attractive," said Raymond James cruise analyst Joseph Hovorka.
Royal Caribbean shares closed up 11.4 percent at $11.23 on the New York Stock Exchange, while those of Carnival edged up 2.3 percent to $26.20.
FURTHER STEPS NEEDED
Still, analysts remained cautious about the prospects of expanded travel, as the measures so far apply only to families with ties to Cuba and infrastructure to receive ships at Cuban ports may take years to develop.
Despite U.S. telecommunications companies appearing to be the ones with the most to gain in the near term, shares of U.S. telecom majors were unmoved by the Obama government's announcement.
"First of all, Cuba has to open up the communications market, which is a bigger hurdle," said Stifel Nicolaus analyst Chris King.
King also said that U.S. telecommunications companies would likely face stiff competition if any Cuban licenses came on the market as it is a largely untapped cellphone market, where private citizens were only very recently allowed to own cellphones.
"This gives (U.S. companies) the option, but they're not going to be the only ones applying for the licenses," he said.
U.S. companies that would likely look at expanding to Cuba could include U.S. market leader Verizon Wireless, owned by Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L), as well as its next biggest wireless rival, AT&T Inc (T.N).
Smaller operator Clearwire Corp (CLWR.O) may also be interested if it were to get funding, said King.
Other bidders would most likely include companies such as Mexico's America Movil (AMXL.MX), Latin America's top cellphone operator, and Digicel Group, an Irish-owned operator with a strong presence in the Caribbean.
"Clearly, if the Obama administration is taking the first step and lightening up restrictions, the hope is this will provide the Cuban government with the opportunity to take steps in the openness direction," said King.
(Additional reporting by Sinead Carew; editing by Patrick Fitzgibbons and Steve Orlofsky)
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