China Investment Corp (CIC), the mainland’s US$200 billion sovereign wealth fund, is in a dilemma.
The deteriorating global financial crisis has forced the fund to halt its overseas investments, with executive vice-president Zhang Hongli saying last week it had been adjusting its investment plans since September and had kept cash in hand.
On the other hand, it is facing tremendous fiscal pressure. Chairman Lou Jiwei said: “CIC must earn more than 300 million yuan (HK$340 million) every day to cope with the interest payments on its US$200 billion or 1.48 trillion yuan principal.”
The fund’s difficulties have been compounded by public criticism of its poor performance since it was officially set up in September 2007. Its bad choices included investments in Lehman Brothers commercial paper and medium-term notes, Blackstone and Morgan Stanley.
CIC previously had a more aggressive approach to overseas investments. In April last year, president Gao Xiqing said the fund had US$80 billion to US$90 billion to invest overseas, as much as US$20 billion more than it had previously allocated.
All of CIC’s overseas investments, including US$5 billion in the US Reserve Primary Fund, US$785 million in Lehman commercial paper and medium-term notes, Blackstone and Morgan Stanley, have been battered by the global financial crisis. Even the US bond market is not offering shelter to CIC’s idle funds.
A CIC spokeswoman rejected reports that Mr. Zhang was talking about stopping investments, saying he was suggesting the fund remained cautious about overseas investments - but not stop investing altogether - as the global economy deteriorated.
But Wei Fengchun, deputy director of research at Jiangnan Securities, wondered where CIC’s US dollar cash for investment abroad could go given the global economic turmoil.
1 comment:
CIC Funds Idle Amid Investment Strategy Review
Adam Chen in Beijing
12 January 2009
China Investment Corp (CIC), the mainland’s US$200 billion sovereign wealth fund, is in a dilemma.
The deteriorating global financial crisis has forced the fund to halt its overseas investments, with executive vice-president Zhang Hongli saying last week it had been adjusting its investment plans since September and had kept cash in hand.
On the other hand, it is facing tremendous fiscal pressure. Chairman Lou Jiwei said: “CIC must earn more than 300 million yuan (HK$340 million) every day to cope with the interest payments on its US$200 billion or 1.48 trillion yuan principal.”
The fund’s difficulties have been compounded by public criticism of its poor performance since it was officially set up in September 2007. Its bad choices included investments in Lehman Brothers commercial paper and medium-term notes, Blackstone and Morgan Stanley.
CIC previously had a more aggressive approach to overseas investments. In April last year, president Gao Xiqing said the fund had US$80 billion to US$90 billion to invest overseas, as much as US$20 billion more than it had previously allocated.
All of CIC’s overseas investments, including US$5 billion in the US Reserve Primary Fund, US$785 million in Lehman commercial paper and medium-term notes, Blackstone and Morgan Stanley, have been battered by the global financial crisis. Even the US bond market is not offering shelter to CIC’s idle funds.
A CIC spokeswoman rejected reports that Mr. Zhang was talking about stopping investments, saying he was suggesting the fund remained cautious about overseas investments - but not stop investing altogether - as the global economy deteriorated.
But Wei Fengchun, deputy director of research at Jiangnan Securities, wondered where CIC’s US dollar cash for investment abroad could go given the global economic turmoil.
Post a Comment