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Thursday, 4 March 2010
China on buying spree of US stocks
Beijing’s appetite for corporate America has expanded rapidly with the nation’s sovereign wealth fund holding investments of US$9.63 billion in 60 United States-listed companies, including icons such as Coca-Cola, News Corp and Apple.
Beijing’s appetite for corporate America has expanded rapidly with the nation’s sovereign wealth fund holding investments of US$9.63 billion in 60 United States-listed companies, including icons such as Coca-Cola, News Corp and Apple.
Analysts said China Investment Corp’s first filing with the United States Securities and Exchange Commission indicated Beijing’s belief that US-listed stocks were at bargain levels after being battered by the economic downturn, and investments would continue.
The US$300 billion sovereign wealth fund was also an active buyer of exchange-traded funds, which accounted for nearly one-fourth of the reported total.
“We expect CIC will continue its strategy of making relatively more investments in commodities, energy and real estate to hedge uncertainties in currencies and paper assets,” said Jing Ulrich, JP Morgan’s chairman for China equities and commodities. “The fund will also continue to invest in companies positioned to benefit from Chinese demand, while abiding by its mandate of investing outside the RMB zone.”
In September 2007, China established the sovereign wealth fund as part of its efforts to direct capital outflow to ease inflationary pressure on the domestic market.
CIC earlier suffered huge losses from its investments in Morgan Stanley and private equity group Blackstone.
The sovereign wealth fund had allocated about US$110 billion for overseas investments, or one-third of its total assets, its chairman Lou Jiwei said last October, adding that half of the amount had been invested.
CIC’s biggest stake in a US-listed company appears to be its US$3.54 billion stake in Teck Resources, a Canadian miner.
“Buying into US stocks is totally different from the holding of US treasuries because the investments were ploughed into companies rather than the government,” said Professor Zhou Dunren of Fudan University, a renowned economist on American studies. “To a certain extent, it could be read as Beijing’s endorsement of confidence in the US economy.”
CIC reportedly will be given an additional US$200 billion by the central government as China seeks to further diversify its US$2.4 trillion foreign exchange reserve. Currently, nearly a third of the forex reserve is invested in US treasury bonds.
“If CIC receives additional capital, it will likely disburse a portion of its new funds to external asset management companies, including private equity firms and hedge funds,” Ulrich said.
Z-Ben Advisors, a fund industry consultancy that studies CIC, said in a report that the filing unveiled only a small portion of the fund’s exposure to American markets. It said CIC’s primary exposure to the US markets was achieved through third-party mandates. “By our estimates, as much as US$65 billion worth of such mandates have now been funded and we strongly suspect that the majority of US equity and fixed-income exposure is derived from them,” the Z-Ben report said.
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China on buying spree of US stocks
Daniel Ren in Shanghai
10 February 2010
Beijing’s appetite for corporate America has expanded rapidly with the nation’s sovereign wealth fund holding investments of US$9.63 billion in 60 United States-listed companies, including icons such as Coca-Cola, News Corp and Apple.
Analysts said China Investment Corp’s first filing with the United States Securities and Exchange Commission indicated Beijing’s belief that US-listed stocks were at bargain levels after being battered by the economic downturn, and investments would continue.
The US$300 billion sovereign wealth fund was also an active buyer of exchange-traded funds, which accounted for nearly one-fourth of the reported total.
“We expect CIC will continue its strategy of making relatively more investments in commodities, energy and real estate to hedge uncertainties in currencies and paper assets,” said Jing Ulrich, JP Morgan’s chairman for China equities and commodities. “The fund will also continue to invest in companies positioned to benefit from Chinese demand, while abiding by its mandate of investing outside the RMB zone.”
In September 2007, China established the sovereign wealth fund as part of its efforts to direct capital outflow to ease inflationary pressure on the domestic market.
CIC earlier suffered huge losses from its investments in Morgan Stanley and private equity group Blackstone.
The sovereign wealth fund had allocated about US$110 billion for overseas investments, or one-third of its total assets, its chairman Lou Jiwei said last October, adding that half of the amount had been invested.
CIC’s biggest stake in a US-listed company appears to be its US$3.54 billion stake in Teck Resources, a Canadian miner.
“Buying into US stocks is totally different from the holding of US treasuries because the investments were ploughed into companies rather than the government,” said Professor Zhou Dunren of Fudan University, a renowned economist on American studies. “To a certain extent, it could be read as Beijing’s endorsement of confidence in the US economy.”
CIC reportedly will be given an additional US$200 billion by the central government as China seeks to further diversify its US$2.4 trillion foreign exchange reserve. Currently, nearly a third of the forex reserve is invested in US treasury bonds.
“If CIC receives additional capital, it will likely disburse a portion of its new funds to external asset management companies, including private equity firms and hedge funds,” Ulrich said.
Z-Ben Advisors, a fund industry consultancy that studies CIC, said in a report that the filing unveiled only a small portion of the fund’s exposure to American markets. It said CIC’s primary exposure to the US markets was achieved through third-party mandates. “By our estimates, as much as US$65 billion worth of such mandates have now been funded and we strongly suspect that the majority of US equity and fixed-income exposure is derived from them,” the Z-Ben report said.
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