2nd LD-Writethru-China Focus: Sovereign wealth fund suffers losses in 2011 overseas investment
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E-mail Xinhua, July 26, 2012
BEIJING, July 25 (Xinhua) -- China's sovereign wealth fund posted losses in its overseas investment portfolios last year due to slow global economic recovery and the European debt crisis, marking the second annual deficit since it was established in 2007.
China Investment Corporation (CIC), the nation's sovereign wealth fund, said Wednesday that it lost 4.3 percent on its overseas portfolio for 2011.
The accumulated annualized return since 2007 stood at 3.8 percent, according to its 2011 annual report, which did not give the specific amount of money it lost last year.
The bleak results even failed to beat inflation levels in China in past years when Chinese people had to endure an inflation rate of 5.9 percent in 2008 and 5.4 percent in 2011.
Lou Jiwei, the CIC chairman, said in the report that he expected the world economy to recover slowly in the future with a "fragile" recovery foundation.
Lou said it is likely for the global financial markets to experience major turbulence, and the CIC will continue to invest overseas in an "active and prudent way" as a long-term investor.
The fund confirmed it received 30 billion U.S. dollars in cash injections from its shareholder, the State Administration of Foreign Exchange, after all its available funds had been invested last year.
But the CIC said the move would not affect its independence in making investment decisions.
The CIC's annual paper was not exceptional compared to the lackluster performances given by the sovereign wealth funds of some other countries, argued Wang Shuilin, a CIC spokesperson.
However, the portfolio of Temasek, the Singaporean sovereign wealth fund, remained resilient last year, with its three-year annualized compounded return to its shareholders at 15 percent, or 1.5 percent in one-year return, according to Temasek's annual report for 2011.
Temasek's returns on post-2002 investments reached 18 percent, well above the CIC's 3.8 percent since it was established.
The CIC was joined by the Government Pension Fund Global, Norway's sovereign wealth fund, which posted a loss of 15.4 billion U.S. dollars last year due to the unpleasant global environment.
The CIC cited its losses from the stock market but pocketed sound returns from treasury bonds and other credit-related financial products, according to the report.
Founded in September 2007, the CIC had a registered capital of 200 billion U.S. dollars from China's huge foreign exchange reserves before the Chinese government's 30-billion-U.S.-dollar cash injection last year.
To cope with challenges, the CIC eyed long-term investment, as it decided in early 2011 to extend the return period to 10 years. It also increased the investment presence in the energy, real estate and infrastructure sectors, where returns would not be cashed in the short-run, Wang noted.
Last September, the company set up CIC International (Hong Kong) Co., Ltd, its subsidiary in charge of overseas investment, as a supplementary body to China Huijin Investment Ltd., the CIC's wholly-owned subsidiary which invests exclusively in China's domestic financial institutions. Enditem
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