CIC puts HK on its agenda for investment

PUBLISHED : Tuesday, 04 March, 2008, 12:00am
UPDATED : Tuesday, 04 March, 2008, 12:00am

China Investment Corp, the mainland's US$200 billion sovereign wealth fund, would invest in Hong Kong as part of a strategy that also includes alternative investments such as in private equity funds, a senior executive said.

Jesse Wang Jianxi, an executive vice-president and the chief risk officer of CIC, said the fund's investment portfolio was based on asset classes and products, not geography.

'Our fund managers would consider investing in Hong Kong under certain categories of assets, products and emerging markets,' Mr Wang said on the sidelines of the opening session of the annual Chinese People's Political Consultative Conference.

He said the company might consider further investments in foreign firms hit by the United States subprime mortgage crisis after buying a stake in Wall Street bank Morgan Stanley. 'If good opportunities arise, we would not rule out making such investments,' Mr Wang said.

The fund made a surprise US$5 billion investment in Morgan Stanley in December for a stake of just under 9.9 per cent. That came after a US$3 billion deal for 9.3 per cent of Blackstone Group before the US private equity fund's initial public offering.

However, the values of both investments have been falling since the US subprime crisis broke out. CIC also spent US$100 million on the initial public offering of China Railway Group in Hong Kong.

Mr Wang yesterday defended the company's decision to buy the Blackstone stake, saying the private equity fund was 'the best in the world' and worthy of long-term investment.

'Our investment is not for short-term gain and we think Blackstone has the value for long-term investment,' he said.

Still, Mr Wang said the CIC now faced pressure in the wake of the subprime crisis. The company has to cope with the interest expense from the sale of 15.5 trillion yuan of special treasury bonds issued by the Ministry of Finance as funding for its US$200 billion initial capital.

Mr Wang said the company was in talks with related departments on a possible reduction of interest.

'The risk tolerance for CIC is rather low, which brings higher requirements for the company's operation,' he said.

Founded in September last year, CIC is tasked with increasing the value of the mainland's US$1.53 trillion foreign exchange reserves. Its overseas portfolio has reached US$8 billion.

Mr Wang urged foreign governments to avoid protectionism against sovereign wealth funds, saying CIC was created to solve a domestic problem of excessive liquidity rather than seeking foreign investment by the government.