2010-07-23 11:10

China's sovereign wealth fund is set to post its best yearly gain in 2009 after stepping up investments in commodities to ride a rebound in global markets.

China Investment Corp is likely to report a return on its global portfolio "well over 10 percent" in its upcoming annual statement, said Rachel Ziemba, London-based senior analyst at Roubini Global Economics. The $300 billion fund had a 2.1 percent loss on its global assets in 2008, after chalking up a 0.2 percent return in its starting year of 2007 when the value of a $3 billion investment in Blackstone Group LP plunged.

Chairman Lou Jiwei pumped nearly $10 billion into commodity-related companies such as Canada's Teck Resources Ltd in the second half to benefit from the global economic recovery. That compared with $4.8 billion in new investments across all industries for the entire 2008.

"2009 results should be good because commodities staged a strong rally," said Francis Lun, general manager at Fulbright Securities Ltd in Hong Kong. "CIC was very timid, which actually helped it to avoid the financial tsunami" in 2008.

Temasek Holdings Pte, Singapore's state investment firm, this month said assets climbed 43 percent to S$186 billion ($135 billion) in the year to March 31. Globally, sovereign fund assets climbed 9 percent in 2009 from a year earlier to $3.5 trillion, London-based research firm Preqin Ltd said in March.

CIC reported its 2008 results on Aug 7, 2009.

Teck Resources, AES

In July last year, CIC bought 17.2 percent of Teck Resources, Canada's largest base-metals producer, for $1.5 billion. It acquired an 11 percent stake in a unit of Kazakhstan's state-run energy company in late September, two weeks before purchasing 45 percent of Nobel Oil Group of Russia. In November, it announced investments in US power producer AES Corp and GCL-Poly Energy Holdings Ltd, China's biggest polysilicon producer.

AES closed at $13.31 in New York trading Dec 31, giving CIC a paper profit of 7 percent, while GCL-Poly shares rose 30 percent from the fund's HK$1.79 purchase price on Nov 19 to the end of last year.

The Reuters/Jefferies CRB Index of 19 raw materials advanced 23 percent in 2009, reversing a 36 percent drop the previous year.

Morgan Stanley, which is about 10 percent owned by CIC, surged 85 percent last year, while Blackstone doubled, helping China's state fund recoup some earlier losses.

A record $1.4 trillion credit expansion by Chinese banks boosted state lenders' profits last year, contributing in turn to CIC's total earnings via unit Central Huijin Investment Co.