China sovereign fund CIC posts first loss on overseas investments in four years

By Xiaochong Zhang and Nicholas Heath

BEIJING (Reuters) – China’s $814 billion sovereign wealth fund China Investment Corp (CIC) gave a bleak outlook after reporting its first loss on overseas investments in four years, battered by a fall in commodity prices and weak currencies.

While total assets at CIC, among the world’s largest sovereign wealth funds, climbed 9 percent last year to $813.8 billion, net return on overseas investments fell to a negative 2.96 percent from a positive 5.47 percent in 2014.

“Given uncertainties like the Fed’s fickleness on raising rates, Brexit and fluctuations of major currencies, 2016 is likely to be another year of sluggish growth, coupled with subdued inflation, low productivity, and lacklustre trade,” Ding Xuedong, CIC’s chairman and CEO, said in its annual report published on Friday.

CIC ranks among the world’s top five state investors alongside Abu Dhabi Investment Authority and Norway’s sovereign wealth fund.

Singapore state investor Temasek earlier in July announced its portfolio value fell 9 percent to S$242 billion ($178.44 billion) in the year ended March 2016.

CIC’s net income fell 17 percent last year to $73.9 billion. It also reported a record foreign exchange loss of $3.77 billion. The 2015 return on overseas investments was the lowest since it returned a negative 4.3 percent in 2011.

At its annual briefing, CIC spokeswoman Liu Fangyu told reporters the faltering performance was mainly due to falling commodity prices, low investment returns on stocks and bonds in a low interest rate environment, and major foreign exchange losses.

About 47 percent of CIC’s global portfolio was invested in stocks in 2015, about 14 percent in fixed income, nearly 13 percent in absolute return, and about 22 percent in long-term investments, it said. Only about 3 percent was held in cash.

CIC invests overseas through two subsidiaries, CIC International Co and newly-launched direct investment vehicle CIC Capital Corp.

It is a major shareholder in China’s biggest banks such as Industrial and Commercial Bank of China Ltd., China Construction Bank Ltd. and Agricultural Bank of China Ltd. via its Central Huijin Investment Ltd. subsidiary.

The Chinese fund ramped up its investment in real estate and infrastructure last year. It has so far made more than 40 property investments in North America, Europe, Asia and Oceania.

CIC was founded in 2007 as a wholly state-owned company to help China earn a higher return on its pile up of foreign exchange reserves, which stood at $3.2 trillion in June.

(Reporting By Zhang Xiaochong, Nicholas Heath and Shu Zhang, Writing by Shu Zhang and Anshuman Daga; Editing by Muralikumar Anantharaman)



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