Sovereign fund to shy away from southern Europe

The Euro250 million (HK$2.48 billion) private equity fund set up by China's sovereign wealth fund to invest in Europe will shy away from the troubled southern Europe region and focus on Germany, France and Scandinavia.

The fund, set up in this month by the China Investment Corporation (CIC) in partnership with the Belgian Federal Holding and Investment Company and private equity group A Capital, has been backed by vice-premier Li Keqiang, who appeared at the fund's first-round fundraising ceremony in Brussels.

Andre Loesekrug-Pietri, chairman of A Capital, said that with the resurgence of regional concerns it was 'not a good time' to invest in consumer-driven industries and the financial services sector with heavy exposure to southern European countries like Greece, Italy and Spain.

The fund is expected to allocate 30 to 35 per cent of its capital to Germany, 20 per cent to Scandinavia, 20 per cent towards France, and the remainder to Britain, Belgium, Netherlands, and other European countries.

Loesekrug-Pietri said the recent concerns about Greece's exit from the euro had started to affect the valuation of mid-cap stocks.

'There is a slight impact on the valuations of good quality companies which previously have not been affected by the euro-zone crisis,' he said.

The fund focuses on mid cap European companies that generate between Euro300 million and Euro3 billion in sales annually.