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Monday, 16 March 2009
China lost US$80b on equities
China may have lost more than US$80 billion (S$123 billion) of its foreign exchange reserves after buying into equities just before world markets collapsed last year, the Financial Times said on Monday.
BEIJING - China may have lost more than US$80 billion (S$123 billion) of its foreign exchange reserves after buying into equities just before world markets collapsed last year, the Financial Times said on Monday.
The poorly-timed investments were carried out by the State Administration of Foreign Exchange, or SAFE, the manager of the nation’s nearly two trillion dollars of reserves, the newspaper said.
‘SAFE has built up one of the largest US equity portfolios of any foreign government entity investing abroad, including the major sovereign wealth funds,’ Brad Setser, an economist at the Council on Foreign Relations, a US-based think tank, told the paper.
‘It appears SAFE began diversifying into equities early in 2007 and, rather than being deterred by the subprime crisis, it continued to buy.’
The report comes after Chinese Premier Wen Jiabao said last week he was ‘a little bit worried’ about the fate of his nation’s huge investments in the United States.
Any estimate of SAFE’s investment portfolio has a large margin of error, since it does not tell the public where it puts its money.
However, according to Setser’s calculations, reported by the Financial Times, China has lost over US$80 billion on holdings of about US$160 dollars in overseas equities.
China’s decision to diversify into equities came after growing criticism that it was not getting enough out of its traditional method of parking its forex reserves mainly in safe but low-yielding US Treasury bonds.
In another bid to diversify, China in 2007 set up a sovereign wealth fund, the China Investment Corporation, charged with managing 200 billion dollars of the nation’s forex reserves.
That corporation’s investment also have now come across as being badly timed, with huge losses sustained on a number of high-profile transactions, including shares in troubled financial giants Morgan Stanley and Blackstone.
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China lost US$80b on equities
16 March 2009
BEIJING - China may have lost more than US$80 billion (S$123 billion) of its foreign exchange reserves after buying into equities just before world markets collapsed last year, the Financial Times said on Monday.
The poorly-timed investments were carried out by the State Administration of Foreign Exchange, or SAFE, the manager of the nation’s nearly two trillion dollars of reserves, the newspaper said.
‘SAFE has built up one of the largest US equity portfolios of any foreign government entity investing abroad, including the major sovereign wealth funds,’ Brad Setser, an economist at the Council on Foreign Relations, a US-based think tank, told the paper.
‘It appears SAFE began diversifying into equities early in 2007 and, rather than being deterred by the subprime crisis, it continued to buy.’
The report comes after Chinese Premier Wen Jiabao said last week he was ‘a little bit worried’ about the fate of his nation’s huge investments in the United States.
Any estimate of SAFE’s investment portfolio has a large margin of error, since it does not tell the public where it puts its money.
However, according to Setser’s calculations, reported by the Financial Times, China has lost over US$80 billion on holdings of about US$160 dollars in overseas equities.
China’s decision to diversify into equities came after growing criticism that it was not getting enough out of its traditional method of parking its forex reserves mainly in safe but low-yielding US Treasury bonds.
In another bid to diversify, China in 2007 set up a sovereign wealth fund, the China Investment Corporation, charged with managing 200 billion dollars of the nation’s forex reserves.
That corporation’s investment also have now come across as being badly timed, with huge losses sustained on a number of high-profile transactions, including shares in troubled financial giants Morgan Stanley and Blackstone.
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