Sovereign wealth fund speeds up overseas investment

13:21, December 07, 2009      

Email | Print | Subscribe | Comments | Forum 

China's sovereign wealth fund, the China Investment Corporation (CIC), has nearly doubled its overseas investment this year compared with last year, putting most of the funds into foreign energy and mining companies.

The sovereign fund, established in 2007 with $200 billion in assets, half designated for overseas investment, has turned to bulk commodities this year, with a dozen investments in en-ergy and mining companies around the world, totaling $9.5 billion, almost twice last year's $4.8 billion overseas investment.

CIC's latest investment was in US power company AES Corporation. CIC announced November 16 that it had purchased a 15 percent stake in AES for $1.58 billion, and also intends to buy a 35 percent stake in AES's wind generation business for $571 million.

Since July, the sovereign fund has also invested in companies such as Canada's SouthGobi Energy Resources, Russian oil company Nobel Oil, Indonesian coalminer PT Bumi Resources Tbk and Kazakhstan's JSC KazMunaiGas Exploration Production.

"CIC has stepped up its overseas investment pace this year, and is eyeing opportunities in commodities such as energy, minerals and real estate after asset bubbles burst in the financial crisis, which could help CIC hedge against accelerating inflation," Lou Jiwei, chairman of CIC, told a forum in Beijing this October, adding that CIC had $50 billion left for overseas investment.

CIC slowed its investment pace in July 2008 due to the global economic downturn. Its overseas investment only amounted to $4.8 billion in 2008, and the rate of the return on its global investment portfolio for 2008 was minus 2.1 percent, according to its annual reports released in August.

The loss of overseas investment was largely caused by CIC's investment in overseas financial institutions, including a $3 billion stake in US private equity giant Blackstone and a $5.6 billion stake in US investment bank Morgan Stanley.

"CIC has turned its investment interest from financial institutions to resources companies, and this will help CIC improve long-term investment returns," said Li Mingxu, an analyst at Anbound Group, a Beijing-based consulting company.

Li said it is still a good time for CIC to acquire overseas resources assets, as commodity prices have growth potential when the economy recovers.

"CIC's investment strategy reveals its optimism on the energy and mining companies, but it is hard to evaluate whether these companies' stocks could bring money," said Zhao Xijun, deputy dean of the School of Finance at Renmin University of China.

Source: Global Times
  • Do you have anything to say?
Special Coverage
Major headlines
Editor's Pick
Most Popular
Hot Forum Dicussion