UPDATE 3-China's CIC says hot money pressuring emerging markets

* CIC sees global liquidity "a bit excessive"

* Calls on all countries to coordinate on capital control

* Eyes direct investments in Asia, Latin American

* Not very big room for U.S. dollar to fall - CIC chairman

(Adds comments on dollar, deals in Brazil and Mexico)

By George Chen and Fion Li

HONG KONG, Jan 20 (Reuters) - The head of sovereign wealth fund China Investment Corp (CIC) [CIC.UL] said capital flows into emerging markets were adding pressure on governments but said it was still keen to invest more in Asia and Latin America.

"At present, global liquidity is a little bit excessive," CIC Chariman Lou Jiwei said at the Asia Financial Forum in Hong Kong on Wednesday.

"Short-term and frequent capital flows into emerging markets (have) brought big pressure on governments to manage capital."

But Lou said CIC is looking to pour more of China's huge foreign exchange reserves into Asia and big Latin American economies such as Brazil to share in their rapid recoveries.

Policymakers in many emerging economies have been worried that inflows of "hot money" could create destabilising asset bubbles in property or stock markets, while pushing up their currencies and making their exports less competitive.

Authorities from Taipei to Brasilia to Moscow have moved to curb such flows, with varying success. [ID:nLJ437424]

On Wednesday, stocks in China .SSEC and Hong Kong .HSI fell on speculation that Beijing had told some major banks to stop lending for the rest of January, in a further attempt at keeping the surging economy from overheating. [ID:nSGE60J0A8]

"All countries should strengthen coordination on and improve liquidity management and maintain prudential monetary policy," said Lou, a former Chinese vice-finance minister.

CIC was established in late 2007 and has about $300 billion under management at present. It has been aggressively investing across the globe since it was formed, but like other Asia sovereign funds has been burnt by some of its early investments in the U.S. financial industry.

"I think it may still take a while for the global economy to recover to a normal level," Lou said. "How to drive domestic consumption is now not only a theme for countries in emerging markets but also for developed economies."

Growth in developed countries like the United States would take even more time to recover to a "normal level", he added.

ASIA & LATIN AMERICA

Taking lessons from substantial paper losses on investments in Blackstone Group (BX.N) and Morgan Stanley (MS.N) following the global financial crisis, CIC has more aggressively sought deals in the energy and commodities sectors since last year.

CIC spent $2 billion buying distressed U.S. assets from property to infrastructure via three funds, including one managed by Goldman Sachs (GS.N), Reuters reported in September.

It also poured up to $2 billion into U.S. mortgages last year under a U.S. Treasury-backed plan, Reuters reported in August.

Lou said that CIC would focus more on investing in Asia this year, but was also in preliminary talks on direct investments in some companies in Mexico and Brazil.

"We will maintain our current portfolio and will also target different currency zones to diversify the categories of our investments," said Lou in response to a question about CIC's investment focus in 2010. He declined to specify further.

"Given that our money is from China's foreign exchange reserves, we cannot make investments at home, which is a pity. As you know, China is the fastest growing economy in the world now."

Lou said CIC would not seek controlling stakes when investing in companies.

U.S. DOLLAR VIEW

Asian markets have been rattled in recent weeks by China's gradual attempts to tighten policy and moderate economic growth. Chinese demand for commodities and other imported goods from its neighbours has provided a major boost to the region in the absence of a strong rebound in key Western markets.

Lou acknowledged that CIC made relatively more investments in commodities, resources and real estate last year in part to hedge uncertainties and risks in major currencies.

When asked for comments on the outlook of U.S. dollar, Lou said: "So far, I didn't see very big room for US dollar to fall. But when the U.S. economy recovers, we may see the dollar begin to fall." China is currently the biggest U.S. debt holder.

Lou added that to hedge the sovereign wealth fund's currency risks, CIC would make some changes in asset allocation this year but did not elaborate. (Additional reporting by Joseph Chaney and Don Durfee) (Editing by Michael Flaherty & Kim Coghill)