Friday, March 09, 2007

china is shifting $reserves to equities

it was only a matter of time. and for china this is for sure better than buying us bonds. but i think the effects for the us stockmarket will be benefitting the least or maybe a net negative ( see examples in the post). first of all lots of firepower that help to keep the rates down will shift to other asset classes.

with steady surplusses coming to china i think that they don´t have to sell bonds to fund their investment vehicle. than the effect for bonds will be more severe. but this scenario is unlikely.

for the rest of the equity market this should be fantastic news on top of the petro$ another major suppert to pimp up valuations.

nur ne frage der zeit bis china diesen schritt vollzieht. so ziemlich jedes investment ausserhalb us anleihen erscheint mir besser. unterm strich glaube ich aber das dieser schritt für us aktien unterm strich negativ sein wird bzw das us aktien am wenigsten profitieren werden.. (siehe beispiele im post). zuerst werden diese summen fehlen um zukünftig us anleihen zu erwerben.

dank der ständigen zuflüsse werden sie sicher keine $anlagen verkaufen müssen. sollte das doch der fall sein (extrem unwahrscheinlich) dürften die auswirkungen spürbar sein.

für die restlichen aktienmärkte sind das fantastische news. neben den petro$ kommt jetzt noch china hinzu um die bewertungen höher als gewöhnlich zu halten.

March 9 (Bloomberg) -- China's government plans to set up an agency to help manage its $1.07 trillion of currency reserves and indicated the fund will invest in companies in a similar manner to Singapore's Temasek Holdings Pte. ( here is very good presentation of temaesk / hier ne gute übersicht /

The agency will ``maximize the profits'' of the reserves, Finance Minister Jin Renqing said today. Lou Jiwei, promoted to China's cabinet on March 6, will manage at least $200 billion as head of the agency, said Yu Yongding, an adviser to the People's Bank of China.

China, the world's second-largest holder of U.S Treasuries, now invests most of its currency reserves in dollar assets and is losing from exchange-rate movements as the yuan gains. The agency's creation may prompt a flood of Chinese investments into overseas technology companies, mines and oil fields to support an economy that grew 10.7 percent last year.

anybody remember the uproar when dubai wanted to recycle some of their petro$ into direct us assets (ports)and not just the end dubai had to split the us and the rest of the operations. the deal was no problem for uk ( aslo under terror threat) and the rest of the world
ich hoffe es können sich noch einige an den aufschrei erinnern als dubai versucht hat öl$ zu in den usa mittels firmenübernahmen (hafenanlagen) zu investieren. letztendlich mußte dubai auf die us häfen verzichten. im rest der welt inklusive uk ging die sache glatt durch
and how big is the chance that the chinese will buy a us oil company? when you look at the "unocal saga" close to zero.....
das die chinesen jemals ne us ölfirma kaufen halte ich für ausgeschlossen. man muß nich nur das geschacher um unocal ansehen. (mit sondersitzungen des kongresses.nationale sicherheit etc.)

``China's new investment company should focus more on securing strategic resources and technology, and not on the financial markets,'' said Zhong Wei, director of Finance Research Center of Beijing Normal University.

State-owned Temasek managed S$129 billion ($84 billion) of assets for Singapore's government as of March last year, holding stakes in companies ranging from Chinese banks and Indian textile makers to domestic airlines and telecommunications operators.

Enhancing Returns
``We will model it on international best practices, including that by Singapore's Temasek,'' Jin said today at a press conference in Beijing. ``We will try to maximize the profits and returns on our management of foreign exchange, guided by the principles of safety and risk management.''

Temasek's profit surged 71 percent to a record S$12.8 billion in the year ended March 2006, while it returned 24 percent to shareholders, matching the MSCI AC Asia Pacific excluding Japan Index and outperforming Singapore's key Straits Times Index, according to Bloomberg data. The yield on the benchmark 10-year U.S. Treasury bond is 4.51 percent. ( and it is in $...zudem noch in $..)..

The nation's foreign-exchange reserves jumped 26 percent, or by more than $200 billion, last year to become the world's largest, driven partly by a record trade surplus.

Turf War?
Jin didn't say how much the agency will manage or elaborate on its investment strategy. He declined to confirm whether his former deputy will head the agency. China's 2006 holdings of U.S. government bonds rose 12.5 percent to $349.6 billion.

Effective Management
China is trying to find new methods to invest the reserves without letting the yuan appreciate too quickly.

The yuan fell 0.06 percent to 7.7442 to the U.S. dollar at 4:07 p.m., after yesterday reaching the strongest since a peg to the dollar was scrapped in July 2005. The currency has risen about 7 percent since the end of the fixed link. (really shocking..../ wirklich dramatisch...)

The government ``will actively explore and develop channels and means for appropriately using state foreign exchange reserves,'' Premier Wen Jiabao said on Monday .....
so lets hope that they will not hire goldman to manage their account....... :-)
bleibt zu hoffen das sie nicht goldman mit der betreung beauftragen.... :-)

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