Qatar fund buys into Citic Capital

A unit of Qatar's sovereign wealth fund has bought a 22 per cent stake in Citic Capital Holdings, linking one of the Middle East's most powerful investors with one of China's top investment funds.

While the sum Qatar is paying for the stake is likely in the tens of millions of dollars, the partnership could have a big impact globally, given the hundreds of billions of dollars in cash each fund has access to. Citic manages US$4.6 billion, but it is partly owned by CIC, China's sovereign wealth fund, which manages US$482 billion.

The deal comes as Qatar has moved aggressively to put its more than US$100 billion in capital to work, at a time when valuations across the globe are low, money supply tight, and traditional investors hesitant.

Citic Capital is the country's top alternative investment firm, though it is known mainly as a private equity and real estate investor. Its private equity arm has operations in China, Japan and the United States.

Citic's China investments include stakes in the Harbin Pharmaceutical Group, Jilin Grain Group and China National Investment & Guaranty.

"For Citic Capital, the transaction would help its overseas expansion, given Qatar Investment's global network. For Qatar, it would give it bigger China exposure, especially in the alternative investment space," said Howhow Zhang, research head at fund group Z-Ben Advisors.

For years, Qatar has shown interest in investing in China and this deal allows it greater access. Qatar was applying for a US$5 billion quota under China's Qualified Foreign Institutional Investor (QFII) scheme, the main channel for foreign investment in Chinese stock and bond markets, the official reported on Monday.

Qatar's sovereign fund, known as the Qatar Investment Authority, was the top cornerstone investor in the Agricultural Bank of China's US$22.1 billion listing in 2010. It still holds US$2.7 billion worth of shares of Agbank, China's third-largest bank.

This article appeared in the South China Morning Post print edition as: Qatar fund buys into Citic Capital