Ares
9th May 2012, 09:37 PM
China Investment Corp., the nation’s sovereign wealth fund, said it has stopped buying European government debt because of an economic crisis on the continent, though it continues to look for new investments there.
“What is happening in Europe right now is of course of concern,” CIC President Gao Xiqing said yesterday in an interview in Addis Ababa, Ethiopia, during the World Economic Forum on Africa. “We still have our people looking at opportunities in Europe, even though we don’t want to buy any government bonds.”
CIC, with $410 billion in assets at the end of 2010, has been cautious on Europe as leaders there struggle to contain a debt crisis that is in its third year and led to bailouts of Greece, Portugal and Ireland. Executive Vice President Jesse Wang said in March that CIC won’t participate in efforts led by the Chinese government to help Europe resolve its debt crisis.
“I don’t expect them being a big buyer, or any substantial buyer or seller of European government debt,” Zhang Zhiming, head of China research for HSBC Holdings Plc in Hong Kong, said in a telephone interview. “The purpose of creating CIC is to seek high-risk, higher-return investments,” which differentiates it from the State Administration of Foreign Exchange, the main manager of China’s foreign reserves that mainly invests in safer investments such as government bonds.
“If European governments want to issue bonds, CIC is not a main target institutional investor,” he said. “But SAFE is, and very important. That doesn’t mean they don’t buy any, but not a big deal.”
Euro Slump
The euro posted its longest slump since 2008 and European shares fell to the lowest in almost four months as concern that Greece will be forced out of the euro zone grew. Spain said yesterday it would take over Bankia SA (BKIA), the banking group with the most Spanish real estate, as part of efforts to bolster confidence in the country’s lenders.
European officials have pledged to tighten fiscal frameworks amid concern the situation would envelop Italy and Spain, the euro region’s third- and fourth-biggest economies.
The Chinese sovereign wealth fund would “love” to boost investments in Africa, Gao said. The company is limited in how much it can invest in Africa because the projects are not large enough to fit its investment criteria, he said.
‘Looking Elsewhere’
“It’s probably not surprising that the Chinese authorities are looking elsewhere,” said Stephen Halmarick, Sydney-based head of investment market research at Colonial First State Global Asset Management, which oversees about $150 billion. “Other investors in other parts of the world will be very cautious about European debt at this moment.”
While CIC is shunning European government debt, the fund is willing to consider infrastructure in Europe, and can take equity stakes in companies that need capital, Jin Liqun, the chairman of the fund’s supervisory board, told CNBC in December.
Government and government agency bonds accounted for 47 percent of CIC’s “diversified” fixed-income securities as of Dec. 31, 2010, the fund said in its 2010 annual report without disclosing figures for European government debt. So-called “diversified” holdings were 76 percent of its global portfolio, as compared to 24 percent of “direct concentrated” investments, according to the report, released in July.
The fund added new investments including U.S. dollar aggregate bonds and euro covered bonds in 2010, the report said without giving more details. Fixed-income investments accounted for 27 percent of its global portfolio as of end of 2010, up from 26 percent in 2009.
Bailout Funds
In February, People’s Bank of China Governor Zhou Xiaochuan said the central bank will invest in Europe’s bailout funds and sustain its holdings of euro assets.
“CIC is a vehicle to make investments overseas and doesn’t necessarily represent what China sovereign is doing,” said Wee- Khoon Chong, fixed income strategist at Societe Generale SA in Hong Kong in a Bloomberg First Word interview.
The fund is boosting investments outside of China as it seeks to increase returns on the nation’s foreign currency reserves and secure commodity supplies. The Chinese government injected about $50 billion this year in the sovereign wealth fund, Gao said. The government has not made a decision on whether to regularly inject capital into the company, he said.
“Right now, we are busy enough, so we don’t worry terribly about recapitalization,” he said. “In the long run, we should do something about it.”
Poorest Continent
The company only considers investments of at least about $100 million in African companies and wants to take no more than a 10 percent stake in them, he said. There are not many companies outside of the mining industry in Africa that fit those criteria, making spending on the world’s poorest continent a challenge, he said.
The ventures need to have a return that is on average about 200 basis points, or 2 percentage points, more than investments in the developed world, he said.
CIC will buy 25 percent of former South African politician Cyril Ramaphosa’s Shanduka Group for 2 billion rand ($251 million), the company said on Dec. 22.
CIC was set up in 2007 with $200 billion from China’s Ministry of Finance. The fund posted an 11.7 percent return on its overseas investments in 2010, it said in its annual report, compared with the 9.6 percent gain of the MSCI World Index.
http://www.bloomberg.com/news/2012-05-09/china-investment-stops-buying-europe-debt-on-crisis-concern-1-.html
“What is happening in Europe right now is of course of concern,” CIC President Gao Xiqing said yesterday in an interview in Addis Ababa, Ethiopia, during the World Economic Forum on Africa. “We still have our people looking at opportunities in Europe, even though we don’t want to buy any government bonds.”
CIC, with $410 billion in assets at the end of 2010, has been cautious on Europe as leaders there struggle to contain a debt crisis that is in its third year and led to bailouts of Greece, Portugal and Ireland. Executive Vice President Jesse Wang said in March that CIC won’t participate in efforts led by the Chinese government to help Europe resolve its debt crisis.
“I don’t expect them being a big buyer, or any substantial buyer or seller of European government debt,” Zhang Zhiming, head of China research for HSBC Holdings Plc in Hong Kong, said in a telephone interview. “The purpose of creating CIC is to seek high-risk, higher-return investments,” which differentiates it from the State Administration of Foreign Exchange, the main manager of China’s foreign reserves that mainly invests in safer investments such as government bonds.
“If European governments want to issue bonds, CIC is not a main target institutional investor,” he said. “But SAFE is, and very important. That doesn’t mean they don’t buy any, but not a big deal.”
Euro Slump
The euro posted its longest slump since 2008 and European shares fell to the lowest in almost four months as concern that Greece will be forced out of the euro zone grew. Spain said yesterday it would take over Bankia SA (BKIA), the banking group with the most Spanish real estate, as part of efforts to bolster confidence in the country’s lenders.
European officials have pledged to tighten fiscal frameworks amid concern the situation would envelop Italy and Spain, the euro region’s third- and fourth-biggest economies.
The Chinese sovereign wealth fund would “love” to boost investments in Africa, Gao said. The company is limited in how much it can invest in Africa because the projects are not large enough to fit its investment criteria, he said.
‘Looking Elsewhere’
“It’s probably not surprising that the Chinese authorities are looking elsewhere,” said Stephen Halmarick, Sydney-based head of investment market research at Colonial First State Global Asset Management, which oversees about $150 billion. “Other investors in other parts of the world will be very cautious about European debt at this moment.”
While CIC is shunning European government debt, the fund is willing to consider infrastructure in Europe, and can take equity stakes in companies that need capital, Jin Liqun, the chairman of the fund’s supervisory board, told CNBC in December.
Government and government agency bonds accounted for 47 percent of CIC’s “diversified” fixed-income securities as of Dec. 31, 2010, the fund said in its 2010 annual report without disclosing figures for European government debt. So-called “diversified” holdings were 76 percent of its global portfolio, as compared to 24 percent of “direct concentrated” investments, according to the report, released in July.
The fund added new investments including U.S. dollar aggregate bonds and euro covered bonds in 2010, the report said without giving more details. Fixed-income investments accounted for 27 percent of its global portfolio as of end of 2010, up from 26 percent in 2009.
Bailout Funds
In February, People’s Bank of China Governor Zhou Xiaochuan said the central bank will invest in Europe’s bailout funds and sustain its holdings of euro assets.
“CIC is a vehicle to make investments overseas and doesn’t necessarily represent what China sovereign is doing,” said Wee- Khoon Chong, fixed income strategist at Societe Generale SA in Hong Kong in a Bloomberg First Word interview.
The fund is boosting investments outside of China as it seeks to increase returns on the nation’s foreign currency reserves and secure commodity supplies. The Chinese government injected about $50 billion this year in the sovereign wealth fund, Gao said. The government has not made a decision on whether to regularly inject capital into the company, he said.
“Right now, we are busy enough, so we don’t worry terribly about recapitalization,” he said. “In the long run, we should do something about it.”
Poorest Continent
The company only considers investments of at least about $100 million in African companies and wants to take no more than a 10 percent stake in them, he said. There are not many companies outside of the mining industry in Africa that fit those criteria, making spending on the world’s poorest continent a challenge, he said.
The ventures need to have a return that is on average about 200 basis points, or 2 percentage points, more than investments in the developed world, he said.
CIC will buy 25 percent of former South African politician Cyril Ramaphosa’s Shanduka Group for 2 billion rand ($251 million), the company said on Dec. 22.
CIC was set up in 2007 with $200 billion from China’s Ministry of Finance. The fund posted an 11.7 percent return on its overseas investments in 2010, it said in its annual report, compared with the 9.6 percent gain of the MSCI World Index.
http://www.bloomberg.com/news/2012-05-09/china-investment-stops-buying-europe-debt-on-crisis-concern-1-.html