India could tap $204bn foreign reserves
By Joe Leahyin Mumbai
Published: May 14 2007 03:00 | Last updated: May 14 2007 03:00
India's growing currency reserves could be used to finance local infrastructure projects if a scheme being set up with 3i, the UK-based private equity group, receives central bank approval.
Last month, 3i announced a strategic partnership with the government's India Infrastructure Finance Company to invest together in projects on a case-by-case basis. The private equity house is set to beginpre-marketing for its $5bn (€3.7bn) fund.
The government is now studying a proposal to use the IIFC to channel some of India's foreign currency reserves into infrastructure. If the scheme is approved by the central bank, the IIFC is likely to deploy some of the reserves to provide credit support for projects set up in co-operation with 3i and other partners.
The Indian government has forecast the country needs $320bn in infrastructure investment in five years as rapid economic growth stretches India's long-neglected ports, roads, airports and power utilities.
This has led to a high-level push to use the some of thecountry's burgeoning foreign reserves, which have increased 26 per cent in the past year to $204bn, forinfrastructure investmentas an alternative to raising new government debt offshore.
P Chidambaram, finance minister, said in his budget speech in February that he was studying a proposal for the IIFC to set up two subsidiaries that would borrow the reserves from the Reserve Bank of India and use them to provide credit support to infrastructure projects.
The proposal could prove controversial. A Moody's Investors Service report said any plan to invest the reserves could face hurdles because the RBI may not fund government debt.
The partnership with 3i followed an earlier announcement that the IIFC is setting up a separate $5bn fund with Citigroup, Blackstone and another state-run organisation, the Infrastructure Development Finance Company.
3i will provide the equity for any project and the IIFC debt financing on commercial terms, probably as part of a syndicate of state-owned Indian banks and other institutions.
3i is expected to inject $500bn into the infrastructure fund.
Anil Ahuja, its managing director and co-head of Asia, declined to comment on the fund, saying only that the group's strategic partnership with the IIFC was a "huge stamp of approval".
3i already has a number of infrastructure-related investments in India, including stakes in Vijaj Electricals India, a powerequipment-maker and Gujarat Adani Port, a port operator.
The IIFC and the RBI declined to comment, saying that proposals on the reserves were still underconsideration.
Copyright The Financial Times Limited 2007
Tuesday, June 5, 2007
China’s reserves
China’s reserves
Published: May 18 2007 13:01 | Last updated: May 18 2007 13:01
It is fair to assume that any fund management group worth its salt will have tilted its hat at Beijing. After all, China recently said it is to decant some of its $1,200bn foreign reserves into a more aggressively invested vehicle. That fund should be up and running by the end of the year with an initial kitty of $200bn-plus. It emerged on Friday that Blackstone, the US private equity firm, had already won a $3bn allocation.
Since the stated aim is to improve returns, it is not surprising that racier asset classes are being considered. Moreover, there is a precedent in Asia for investing public money with financial sponsors: the Korean national pension fund, for example, has handed modest parcels of cash to the buy-out fraternity. And anyone still goggle-eyed at the thought of the world’s biggest communist nation making a pact with the world’s most ruthless capitalists should bear in mind that Mao’s little red books are already history. In today’s China, the number of stock market accounts exceeds the number of paid-up Communist party members.
Besides, plans to diversify reserves are all the rage in Asia. Singapore’s government investment fund was launched in 1981 with a few billion dollars; today it presides over a portfolio worth more than $100bn with a diverse (but undisclosed) asset allocation. Singapore’s timing may have been better: China’s move comes as bubbles hover across the investment horizon. Beijing is still selecting fund managers, although it is a fair bet that other international houses will be included in the line-up. Still, the news that a powerful US firm such as Blackstone will be entrusted with some of China’s billions should break the ice when China and America’s “strategic economic dialogue” kicks off next week. It should also detract from too much whining about the miserly interest rate rise and token renminbi move offered on Friday.
Published: May 18 2007 13:01 | Last updated: May 18 2007 13:01
It is fair to assume that any fund management group worth its salt will have tilted its hat at Beijing. After all, China recently said it is to decant some of its $1,200bn foreign reserves into a more aggressively invested vehicle. That fund should be up and running by the end of the year with an initial kitty of $200bn-plus. It emerged on Friday that Blackstone, the US private equity firm, had already won a $3bn allocation.
Since the stated aim is to improve returns, it is not surprising that racier asset classes are being considered. Moreover, there is a precedent in Asia for investing public money with financial sponsors: the Korean national pension fund, for example, has handed modest parcels of cash to the buy-out fraternity. And anyone still goggle-eyed at the thought of the world’s biggest communist nation making a pact with the world’s most ruthless capitalists should bear in mind that Mao’s little red books are already history. In today’s China, the number of stock market accounts exceeds the number of paid-up Communist party members.
Besides, plans to diversify reserves are all the rage in Asia. Singapore’s government investment fund was launched in 1981 with a few billion dollars; today it presides over a portfolio worth more than $100bn with a diverse (but undisclosed) asset allocation. Singapore’s timing may have been better: China’s move comes as bubbles hover across the investment horizon. Beijing is still selecting fund managers, although it is a fair bet that other international houses will be included in the line-up. Still, the news that a powerful US firm such as Blackstone will be entrusted with some of China’s billions should break the ice when China and America’s “strategic economic dialogue” kicks off next week. It should also detract from too much whining about the miserly interest rate rise and token renminbi move offered on Friday.
Beijing closer to managing foreign reserves more actively
ASIA-PACIFIC: Beijing closer to managing foreign reserves more actively
By Richard McGregor in Beijing, Financial Times
Published: Feb 14, 2007
China's plans to establish a body to manage more aggressively a portion of its $1,000bn (£514bn) in foreign reserves are taking shape, with a senior ministry of finance official slated to take charge of the new institution.
Advisers to the Chinese government said yesterday that Lou Jiwei, the long-standing vice-minister of finance, had been in discussions to take a position which could see him overseeing a $200bn global investment fund.
However, the final shape of the fund remains the subject of an intense internal debate, unlikely to be settled before the annual meeting of the National People's Congress early next month.
The debate is being closely monitored by global investment banks, which stand to win large mandates help China manage the money in offshore securities markets.
Under one proposal before the State Council, China's cabinet, Mr Lou would head an institution responsible for managing investments both at home and abroad. Such a body would incorporate investment companies now under the People's Bank of China - the central bank - which have controlling stakes in a number of the country's largest banks and brokerage houses.
Shareholdings in state banks held by the PBoC's biggest investment company, Central Huijin Investment, were secured using funds from the reserves. But the PBoC has argued that companies such as Huijin had done a good job in reforming the banks and should remain autonomous, said officials close to the talks.
To settle what has at times become a heated debate, the government is considering establishing two institutions, both with ministerial status reporting to the State Council. One, headed by Mr Lou, would be responsible for offshore investments, such as the Government Investment Corp in Singapore; the second would handle domestic investments, and be headed by Xie Ping, the outspoken boss of Huijin.
However, neither the personnel heading the companies nor their structure has been settled. The manner in which any new body acquires the funds from the foreign reserves, which are now managed by a company under the PBoC, has also not been decided.
The reserves are now assets held on the PBoC's balance sheet, and must be "bought" from the central bank before they can be deployed elsewhere.
Haizhou Huang, of Barclays Capital in Hong Kong, said that the new institution could help "siphon off liquidity" from the banking system.
By Richard McGregor in Beijing, Financial Times
Published: Feb 14, 2007
China's plans to establish a body to manage more aggressively a portion of its $1,000bn (£514bn) in foreign reserves are taking shape, with a senior ministry of finance official slated to take charge of the new institution.
Advisers to the Chinese government said yesterday that Lou Jiwei, the long-standing vice-minister of finance, had been in discussions to take a position which could see him overseeing a $200bn global investment fund.
However, the final shape of the fund remains the subject of an intense internal debate, unlikely to be settled before the annual meeting of the National People's Congress early next month.
The debate is being closely monitored by global investment banks, which stand to win large mandates help China manage the money in offshore securities markets.
Under one proposal before the State Council, China's cabinet, Mr Lou would head an institution responsible for managing investments both at home and abroad. Such a body would incorporate investment companies now under the People's Bank of China - the central bank - which have controlling stakes in a number of the country's largest banks and brokerage houses.
Shareholdings in state banks held by the PBoC's biggest investment company, Central Huijin Investment, were secured using funds from the reserves. But the PBoC has argued that companies such as Huijin had done a good job in reforming the banks and should remain autonomous, said officials close to the talks.
To settle what has at times become a heated debate, the government is considering establishing two institutions, both with ministerial status reporting to the State Council. One, headed by Mr Lou, would be responsible for offshore investments, such as the Government Investment Corp in Singapore; the second would handle domestic investments, and be headed by Xie Ping, the outspoken boss of Huijin.
However, neither the personnel heading the companies nor their structure has been settled. The manner in which any new body acquires the funds from the foreign reserves, which are now managed by a company under the PBoC, has also not been decided.
The reserves are now assets held on the PBoC's balance sheet, and must be "bought" from the central bank before they can be deployed elsewhere.
Haizhou Huang, of Barclays Capital in Hong Kong, said that the new institution could help "siphon off liquidity" from the banking system.
Asia 'exploring' approach to reserves
Asia 'exploring' approach to reserves
By Mark Schieritzin Frankfurt
Published: May 25 2007 03:00 | Last updated: May 25 2007 03:00
China's unprecedented $3bn investment in Blackstone, the US buy-out fund, is the beginning of a trend that will see Asian countries take a more "innovative" approach to investing their foreign exchange reserves, according to the vice-president of the Asian Development Bank.
Liqun Jin, a former Chinese deputy finance minister, told FT Deutschland, the FT's sister paper: "Asian countries are exploring innovative ways to invest their reserves. More diversity is welcome."
Such a new approach could provide the private equity industry with a swathe of fresh capital from Asian countries. China alone has accumulated foreign exchange reserves amounting to $1,200bn (€890bn, £603bn), most of which is invested in US bonds.
The Chinese government has said it intends to use $3bn of its reserves to buy a 9.9 per cent stake in Blackstone, coinciding with the US buy-out group's landmark $40bn stock market listing, which is expected in the next few months. Beijing's move will allow the private equity group to almost double its original target of raising $4bn.
"China has always had a conservative approach to reserve management," Mr Jin said. The priorities had traditionally been safety and liquidity. "But when the foreign exchange reserves are going up, keeping these priorities is not enough," he said. It was sufficient for the country to keep a share of its reserves liquid. "If you keep all resources in a very low yielding asset, you are losing money."
Mr Jin damped fears Asian countries were planning to take control of western companies on a large scale. "Investing in Blackstone does not mean we are buying them up. Transactions like this will create a better platform for Asian countries to work together with European and American countries." He expects China and other emerging economies to continue to accumulate foreign exchange reserves.
Copyright The Financial Times Limited 2007
By Mark Schieritzin Frankfurt
Published: May 25 2007 03:00 | Last updated: May 25 2007 03:00
China's unprecedented $3bn investment in Blackstone, the US buy-out fund, is the beginning of a trend that will see Asian countries take a more "innovative" approach to investing their foreign exchange reserves, according to the vice-president of the Asian Development Bank.
Liqun Jin, a former Chinese deputy finance minister, told FT Deutschland, the FT's sister paper: "Asian countries are exploring innovative ways to invest their reserves. More diversity is welcome."
Such a new approach could provide the private equity industry with a swathe of fresh capital from Asian countries. China alone has accumulated foreign exchange reserves amounting to $1,200bn (€890bn, £603bn), most of which is invested in US bonds.
The Chinese government has said it intends to use $3bn of its reserves to buy a 9.9 per cent stake in Blackstone, coinciding with the US buy-out group's landmark $40bn stock market listing, which is expected in the next few months. Beijing's move will allow the private equity group to almost double its original target of raising $4bn.
"China has always had a conservative approach to reserve management," Mr Jin said. The priorities had traditionally been safety and liquidity. "But when the foreign exchange reserves are going up, keeping these priorities is not enough," he said. It was sufficient for the country to keep a share of its reserves liquid. "If you keep all resources in a very low yielding asset, you are losing money."
Mr Jin damped fears Asian countries were planning to take control of western companies on a large scale. "Investing in Blackstone does not mean we are buying them up. Transactions like this will create a better platform for Asian countries to work together with European and American countries." He expects China and other emerging economies to continue to accumulate foreign exchange reserves.
Copyright The Financial Times Limited 2007
Gulf states’ foreign reserves swell
Gulf states’ foreign reserves swell
By Richard Beales in New York
Published: May 31 2007 23:04 | Last updated: May 31 2007 23:04
Six Persian Gulf states now have almost $1,600bn in foreign assets, dwarfing even China’s mammoth $1,100bn of foreign reserves, according to a new report from the Institute of International Finance.
The IIF report attempted to assess how the countries of the Gulf Co-operation Council had deployed their “oil windfall” in recent years. But it noted an “extraordinary deficiency” of information on the capital flows and foreign asset holdings of the GCC’s members, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. As well as traditional dollar investments, the IIF said evidence also suggested the six countries had “a strong interest in investments in emerging markets, particularly in the Middle East region and east Asia.”
The UAE, Saudi Arabia and Kuwait account for the bulk of the GCC’s $1,550bn of foreign asset holdings, according to the IIF. The overall holdings represented 225 per cent of the GCC’s gross domestic product while China’s foreign reserves represented 42 per cent of GDP. More generally, the IIF said that private capital flows to emerging markets were on track to match last year’s record of more than $550bn, a sign of a generally positive economic environment.
But Josef Ackermann, chairman of the IIF’s board of directors and of Deutsche Bank’s management board, said there were vulnerabilities in the economic outlook.
“There are risks and uncertainties and it is especially important at this time that borrowers and investors alike pursue prudent risk management,” he said.
William Rhodes, senior vice chairman of the IIF and of Citigroup, added: “Due to high levels of liquidity and the chasing of yield, we are seeing a lack of differentiation in the pricing of various financial assets in global markets today. The time has assuredly come when investors need to differentiate much more carefully between various types of risks, and to price risks according to fundamentals.”
Mr Ackermann said the scale of the private sector’s investment in emerging markets meant it had a major role to play in crisis prevention.
Copyright The Financial Times Limited 2007
By Richard Beales in New York
Published: May 31 2007 23:04 | Last updated: May 31 2007 23:04
Six Persian Gulf states now have almost $1,600bn in foreign assets, dwarfing even China’s mammoth $1,100bn of foreign reserves, according to a new report from the Institute of International Finance.
The IIF report attempted to assess how the countries of the Gulf Co-operation Council had deployed their “oil windfall” in recent years. But it noted an “extraordinary deficiency” of information on the capital flows and foreign asset holdings of the GCC’s members, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the UAE. As well as traditional dollar investments, the IIF said evidence also suggested the six countries had “a strong interest in investments in emerging markets, particularly in the Middle East region and east Asia.”
The UAE, Saudi Arabia and Kuwait account for the bulk of the GCC’s $1,550bn of foreign asset holdings, according to the IIF. The overall holdings represented 225 per cent of the GCC’s gross domestic product while China’s foreign reserves represented 42 per cent of GDP. More generally, the IIF said that private capital flows to emerging markets were on track to match last year’s record of more than $550bn, a sign of a generally positive economic environment.
But Josef Ackermann, chairman of the IIF’s board of directors and of Deutsche Bank’s management board, said there were vulnerabilities in the economic outlook.
“There are risks and uncertainties and it is especially important at this time that borrowers and investors alike pursue prudent risk management,” he said.
William Rhodes, senior vice chairman of the IIF and of Citigroup, added: “Due to high levels of liquidity and the chasing of yield, we are seeing a lack of differentiation in the pricing of various financial assets in global markets today. The time has assuredly come when investors need to differentiate much more carefully between various types of risks, and to price risks according to fundamentals.”
Mr Ackermann said the scale of the private sector’s investment in emerging markets meant it had a major role to play in crisis prevention.
Copyright The Financial Times Limited 2007
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