CIC reverses overseas investment losses in 2009

SHANGHAI, July 30 (Reuters) - China Investment Corp (CIC), the country's $300 billion sovereign wealth fund, posted an 11.7 percent return on its global investment in 2009, reversing losses in the previous year and lending it support to win fresh government funding.

CIC posted an 81 percent jump in net profit last year to $41.7 billion, its 2009 annual report showed.

The jump in profit was boosted by investments in overseas bonds, stocks and resource companies such as U.S. power company AES Corp (AES.N) and Indonesian coal miner PT Bumi Resources (BUMI.JK), as the world economy recovered.

CIC's overseas portfolio posted a 2.1 percent loss in 2008.

"CIC made a good bet at the right time, and the performance is not bad considering the conservative nature of the fund," said Zhang Haochuan, analyst at fund consultancy Z-Ben Advisors in Shanghai.

"With such a track record, it's very likely for CIC to get new funding soon from the central government, as China's foreign exchange reserves continue to accumulate."

CIC, set up in late 2007 to manage part of China's ballooning foreign currency savings, this week started a new round of global hiring as it steps up overseas investment and seeks new government funding, worth $100 billion as reported by local media. [ID:nTOE66R020]

CIC has been boosting exposure to risky assets overseas since May 2009, after avoiding the worst part of the global financial crisis in 2008, but sees choppy conditions ahead.

"Looking into the future, we will still face a challenging investment environment in 2010," Chairman and Chief Executive Lou Jiwei said in CIC's annual report. "The global economy hasn't yet stood firmly on its feet, and the market will remain volatile."

OVERSEAS INVESTMENT

CIC made an overseas investment of $58 billion in 2009, compared with $21 billion during the previous 15 months, and boosted equity holdings in its global portfolio to 36 percent at the end of 2009, from 3.2 percent a year earlier.

The Beijing-based fund also boosted its fixed-income asset weightings to 26 percent from 9 percent, while slashing its cash holdings to 32 percent from 87.4 percent at the end of 2008.

"We will closely monitor changes in the global investment environment, and make timely adjustment to our asset allocations," CIC said in its annual report, adding it would carefully manage risk in a balanced portfolio.

In addition to listed stocks and bonds, CIC has also been ramping up private equity investment in foreign companies, especially those in industries including infrastructure, clean-energy and commodities, CIC said, stressing that its activities are purely commercial-oriented.

"China is seeking to diversify its resource bases, so CIC's investment is very much in line with Beijing's long-term strategies," Zhang of Z-Ben Advisors said.

Companies in which CIC invested in 2009 include Canadian coal miner SouthGobi Energy Resources Ltd (SGQ.TO), AES Corp and PT Bumi Resources, Indonesia's biggest coal miner by output.

CIC generates a total return on equity of 12.9 percent, including its investment in domestic financial institutions through its unit Central Huijin, compared with a return of 6.8 percent in 2008.

The fund boosted the number of employees by 66 percent to 250 last year, and is still aggressively hiring. ($1=6.77 Yuan) (Reporting by Samuel Shen and Jacqueline Wong)