2010-07-23 11:10

Bank stakes

The Industrial & Commercial Bank of China Ltd, the world's most profitable lender that was 35.4 percent owned by Huijin, had a 20.2 percent return on equity last year. Bank of China Ltd, 67.5 percent held by the CIC investment arm, had 81 billion yuan in profit.

"2010 will be a tougher year for CIC given that many risky assets have suffered," Ziemba said. "CIC's pace of purchases seems to have slowed down in the first half of 2010, as it has spent a greater portion of its liquid funds, having deployed much of the international portfolio in 2009."

CIC had 24.68 percent of its global portfolio in public equity markets, Wang said at the Asia Banking and Finance Conference last month. The sovereign wealth fund holds about 18 percent of its investments in fixed-income securities and 8.8 percent in inflation-linked products, he said. Almost 7 percent is held in private-equity funds.

Rally Stalls

The MSCI World Index, which surged 27 percent in 2009, has dropped 5 percent this year as the European debt crisis and China's efforts to curb asset bubbles threatened the global recovery. PT Bumi Resources, Indonesia's biggest coal producer in which CIC made its largest investment announced in 2009, has fallen nearly 30 percent.

Excluding investments held in the Huijin unit, CIC isn't allowed to invest in China. The government may move control of Huijin to a new agency it plans to set up to hold stakes in the nation's State-owned financial companies, China Daily reported July 7.

That may result in more volatility for CIC as it would make the international portfolio the only assets it manages, Ziemba said.

Still, "it will reduce concerns from international regulators that CIC is investing on behalf and in conjunction with its bank subsidiaries," she said. "That might reduce concerns about stakes it takes abroad."