Angola state fund keen on Hong Kong capital markets

Chairman eyes bonds in city while seeking mainland partners to co-invest in Africa

PUBLISHED : Monday, 28 April, 2014, 4:43am
UPDATED : Monday, 28 April, 2014, 4:43am

Angola's sovereign wealth fund, Fundo Soberano de Angola, is looking to invest in Hong Kong's capital market and seeking Chinese partners to co-invest in Africa, said fund chairman Jose Filomeno dos Santos.

"We are considering co-investing in the Hong Kong capital market. Hong Kong is a bridge to [the mainland] and it allows repatriation of profits and more flexibility of capital movements. That is important for us as a foreign investor," said dos Santos, a son of Angolan President Jose Eduardo dos Santos.

The fund's international investments in Hong Kong would be mainly in government bonds, bonds issued by the mainland's state-owned enterprises and currency instruments, he said. "Hong Kong is a platform for investment in the yuan. We will see whether it is a good investment avenue."

During his recent visit to Hong Kong, dos Santos held talks with InvestHK, the government investment agency in the city, he said.

The Angolan fund, established in 2012, currently has US$5 billion under management.

Over the next two years, the fund would invest half its portfolio into mainly government bonds and bonds of large companies in the Group of Seven economies as well as "solid emerging economies like China", said dos Santos. "Hong Kong is the hub to make international investments into the mainland," he said.

The fund would invest the other half in infrastructure, agriculture, mining and hospitality projects in sub-Saharan Africa, dos Santos added. "We are looking for co-investors in Hong Kong that are prepared to take such risks."

The potential co-investors in which the fund had "a higher degree of confidence" were the mainland's large state enterprises with offices in Hong Kong, he said. "We find Chinese foreign investments are driven out of Hong Kong."

The fund's endowment will increase by injections from a state reserve account funded by the sale of Angolan state oil.

This account received US$3.5 billion of oil revenue every year, which was partly used to top up the state budget with the surplus going to the fund, dos Santos said.

More than 40 per cent of Angolan oil went to China, he said. The African state and Saudi Arabia are the two biggest exporters of crude oil to China.

A lot of this oil revenue was used as guarantee for government-to-government loans from China, which typically financed infrastructure in Angola, said dos Santos. "The relationship between the two countries is very intense and crucial to China's energy security and Angola's economic and social development," he said.

Dos Santos dismissed the notion that Angola's economic ties with China are growing because Western firms are reluctant to do business with Angola due to corruption concerns. The government was reforming its institutions to make them more open and transparent, he said.

Angola ranked 153 out of 177 nations in Transparency International's corruption perception index last year.