China’s Wealth Fund Seeks to Stabilize Equity Markets
China Investment Corp., the nation’s $200 billion sovereign wealth fund, signaled it may invest in stocks rocked by subprime mortgage defaults.
“CIC wants to be a stabilizing force in the international capital markets,” Chairman Lou Jiwei told a conference in Beijing today. He then cited a “recent example” in which a similar fund invested in a financial institution with subprime losses, without identifying the two parties.
Abu Dhabi Investment Authority this week agreed to buy a $7.5 billion stake in Citigroup Inc., helping the biggest U.S. bank by assets to bolster capital eroded by credit-market losses. China Investment, which began operations in September, was set up to help improve returns on China’s $1.46 trillion of reserves.
“The steady stream of sovereign wealth funds buying distressed assets tells us there is a buyer of last resort out there,” said Robert Rennie, chief currency strategist in Sydney at Westpac Banking Corp., the fourth-largest Australian bank. He said that will encourage investors to buy higher-yielding assets.
The dollar climbed to $1.4821 per euro as of 3:52 p.m. in Tokyo from $1.4841 late in New York yesterday. The MSCI Asia Pacific Index of stocks climbed 2.6 percent.
State-run investment funds will grow to $7.9 trillion in combined size from $1.9 trillion now as currency reserves climb in countries including China and Russia, Merrill Lynch economists wrote in a report last month. Abu Dhabi’s investment followed purchases by U.A.E. fund Dubai International Capital LLC in companies including London-based HSBC Holdings Plc, Europe’s biggest bank by market value.
Tags: Citigroup, investment