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NSSF keeps assets to maintain market stability
The national pension fund will struggle to make a profit this year after suffering big losses on its  equity investments, the chairman of the National Social Security Fund said in comments published yesterday.
But Dai Xianglong said the NSSF would not dump the fund's stock investments to stem further losses because it had a duty to help maintain the stability of the financial market.
'The overall realised gains of the NSSF in the first half of the year could not offset the shrinkage of our stock assets. The NSSF faces a serious challenge in yielding operating profits for the whole year,' Mr Dai told the People's Daily in an interview.
The fund has been hit hard by the plunging domestic stock market this year after the benchmark Shanghai  Composite Index fell 48 per cent in the first half and nearly 55 per cent from  its historic high in October.
Mainland mutual funds lost 1.08 trillion yuan (HK$1.24 trillion) in the first half, as domestic stock indices dived, including a 413.9 billion yuan loss in the second quarter, TX Consulting said yesterday.
That value of  managed assets has  shrunk by one-third since the mutual funds industry recorded assets of 3.28 trillion yuan at the end of last year.
Mr Dai said the NSSF's equities had  outperformed the index and the fund would not make significant changes to its investment portfolio. 'We will keep the percentage of our stock investment stable and increase investment in fixed-income products,' he said.
Last month, Mr Dai said the fund's total assets had risen to more than 600 billion yuan, a significant increase on the 516.2 billion yuan recorded at the end of last year. Roughly 30 per cent of NSSF's assets were invested in domestic A shares at the start of the year, according to  Z-Ben Advisors.
The fund also has significant exposure to mainland companies listed in Hong Kong, especially banking giants Bank of Communications, Bank of China, and Industrial and Commercial Bank of China, in which it holds  large stakes.
'The fund has a 20-year investment horizon. They may talk about their role in stabilising the markets but they actually have no reason to sell,' said Peter Alexander, a director of Z-Ben Advisors.
However, Mr Dai confirmed that the NSSF would continue  to diversify by making more direct investments in enterprises and ploughing more cash into equity funds. The pension fund is allowed to invest up to 10 per cent of its assets in private equities.
Earlier this year, the NSSF announced it would invest 100 billion yuan in private equity funds by 2010, including an initial 2 billion yuan in each of two domestic funds being established by CDH Investments and Hony Capital.
'Our investment decision must not only ensure the maintenance and appreciation of the fund's value but maintain the stability of the financial market ... When the stock market is at its low, our fund's role in stabilising the market will be more visible,' Mr Dai said.



Pension fund takes big losses from share slump