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UPDATE 2-China's sovereign fund says hurt by unsteady economy
August 8, 2014 / 7:37 AM / 3 years ago

UPDATE 2-China's sovereign fund says hurt by unsteady economy

(Recasts, adds details)

By Koh Gui Qing

BEIJING, Aug 8 (Reuters) - China’s $653 billion sovereign wealth fund, China Investment Corp. (CIC), posted on Friday a 12 percent jump in net profits for 2013, but warned that its performance is being pressured by global economic uncertainties.

Created to earn higher returns for China’s $4 trillion foreign exchange reserves, CIC said it liked the farming, property, infrastructure and high-tech sectors, but that it was getting harder to pick investments in an unpredictable environment.

A bigger bet on global stock markets and government bonds in emerging countries - at the expense of sovereign bonds in developed economies - helped CIC earn a 9.3 percent return on its overseas investments in 2013, down slightly from 10.6 percent in 2012.

“In this year’s environment, the pressures that we face in investment and returns are quite large,” said Liu Fangyu, CIC’s spokeswoman, declining to elaborate on any investment made by CIC in the past year.

On a cumulative and annualised basis, CIC’s returns on its overseas investments - which are worth about $200 billion in total, according to Liu - rose to 5.7 percent last year. That is its second-best performance since the fund’s inception in 2007, and up from a 5 percent return in 2012.

CIC, whose previous high-profile investments included taking a 10 percent stake in Britain’s Heathrow Airport Holdings in 2012 for 450 million pounds ($756.5 million), has not announced any deals of note in the past year as it underwent a leadership reshuffle.

Chairman Ding Xuedong was appointed in July last year after his predecessor, Lou Jiwei, was made finance minister. Vice Chairman Li Keping was appointed in February after the incumbent, Gao Xiqing, retired.

Besides its foreign holdings, CIC has domestic investments, including ownership of swathes of China’s banking sector held through its unit Central Huijin.


For 2013, CIC said its net profits reached $86.9 billion compared with $77.7 billion the year before. It previously put its 2012 net profit at $77.4 billion, and did not explain the discrepancy at a briefing to unveil the figures in an annual report.

Between asset classes, global stock market investments accounted for 40 percent of CIC’s overseas portfolio last year, up from 32 percent in 2012, the annual report showed.

Financial stocks were CIC’s top pick, taking up 23 percent of its equity investment, followed by consumer shares at 12.5 percent, and information technology counters at 12 percent.

The fund’s exposure to “long-term investments”, which include investments in private equity, commodities, infrastructure and real estate, was pared to 28 percent from 32 percent in 2012.

The fund held less cash relative to other investments last year, and fixed income also accounted for a smaller slice of total foreign assets at 17 percent, compared with 19 percent in 2012.

The U.S. stock market took up the bulk of CIC’s investment in foreign equities at 46 percent, while bourses in other developed countries held 37 percent of the fund’s share investment. Emerging stock markets had the lowest weighting at 17 percent.

A breakdown of CIC’s fixed income investment showed it moved its cash from developed countries to emerging markets.

Sovereign bonds in advanced economies took up 44 percent of total fixed income investment, down from 55 percent in 2012, the annual report showed. Exposure to emerging markets in the meantime rose to 27 percent from 17.5 percent. (Editing by Simon Cameron-Moore and Robert Birsel)

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