China 's CIC Held Talks for Brasil and Mexico Investments

China’s CIC Held Talks for Brazil, Mexico Investments (Correct)
January 20, 2010, 6:57 AM EST
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Jan. 20 (Bloomberg) -- China Investment Corp., the nation’s sovereign wealth fund, has had “early” talks for direct investments in Brazil and Mexico, Chairman Lou Jiwei said.

The sovereign wealth fund plans to increase direct investments this year and prioritizes such investments in developing markets, Lou said at a financial forum in Hong Kong today. CIC plans to be an “active, minority” shareholder in companies, instead of being involved in day-to-day operations, he said.

“In developing countries, the public capital markets are not as deep as developed countries,” Lou said. “We’re more interested in direct investments in developing countries.”

CIC, which held almost $300 billion in assets at the end of 2008, last year accelerated investments in resource-related companies, from U.S. power producer AES Corp. to Russia’s Nobel Oil Group, to hedge against rising inflation. Brazil is the second-biggest exporter of iron ore, while China is the largest buyer of the raw material.

“I believe CIC will continue to concentrate on resources, because it is the vehicle for China policy to secure resources for the country,” Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong, said in a Jan. 18 interview.

Declining asset prices after the worst market rout since World War II prompted the sovereign fund to quicken spending on energy, minerals and real estate assets in the second half. The fund earlier this month agreed to invest $50 million in the initial public offering of SouthGobi Energy Resources Ltd., the Vancouver-based coal producer operating in the southern deserts of Mongolia.



Iron Ore Imports



China, the biggest consumer of iron ore and metals, last year raised imports of the material by 42 percent to a record 628 million metric tons. Brazil is home to the world’s largest iron ore supplier, Vale SA, and is the second-biggest exporter after Australia. Mexico is the second-largest maker of silver, after Peru, and also produces copper from mines owned by companies including Grupo Mexico SAB.

CIC will continue to rely more on external managers in inefficient markets such as the public markets in developing countries including Latin America and Asia, Lou said. It will increase the use of internal managers in more efficient markets, he said. The fund uses outside managers for more than 70 percent of its total investments due to its lack of experience, he said.

CIC, set up in 2007, invests the $110 billion it has for overseas mainly in traded financial products, with only “small amounts” on direct investments, Lou said in October.

The sovereign wealth fund will stick to its strategic allocations, Lou said today without being specific. The fund’s inability to invest in China, the world’s fastest-growing major economy, is a disadvantage, he added.

CIC is also investing in a U.S. infrastructure project, Lou said today without providing details.




--Bei Hu, Zhang Dingmin. Editors: Andreea Papuc




To contact the editor responsible for this story: Andreea Papuc at Apapuc1@bloomberg.net