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Doing Their Part |
rffrydr
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Joined: 30 Oct 2005
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 Posted: Tue Sep 04, 2007 4:34 am Post subject: Doing Their Part |
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Wall of money coming our way? I've seen estimates of 100billion this year; 700+over the next five.
| Quote: | Match that, Ben Bernanke. While the US and other central banks try to restore confidence in financial markets, China is preparing to unleash trillions of dollars of investment in global assets.
To be sure, Beijing's move to allow individuals to buy unlimited equities offshore carries caveats. All purchases must be made via the northern city of Tianjin and buyers will be restricted to Hong Kong stocks. But these limitations should prove temporary, if the pilot scheme goes smoothly. Indeed, some analysts reckon non-Tianjin residents will be able to participate from the off.
Add in the fact that the move was made ahead of the party congress meeting and this starts to look like a fundamental change of policy. Allowing unlimited renminbi to leave the country - a not unappealing prospect for the Dollars 2,200bn idling in deposits - is the boldest step yet in the march towards capital account liberalisation.
So why now? There are several possibilities, including increasing desperation over pressure on the renminbi and inflation - as demonstrated again by yesterday's tiny rate rise. It is also an admission, of sorts, that the existing scheme for offshore investment has been a flop.
But it does reflect confidence. Having presided over one of the world's best-performing markets, the authorities are allowing investors to liquidate their holdings and buy the same stocks across the border, where the 40-odd dual-listed shares are on average 75 per cent cheaper.
The rub is that most Chinese investors are likely to continue investing in momentum at home rather than value across the border. It is also worth bearing in mind that, tricky though they may be to execute, policy reversals are always possible, say, if too much money heads for the exit. That may explain why Beijing was sufficiently confident to pull this off - but it should not stop investors in the Hong Kong market feeling supremely smug.
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There seems to be some interest in South America.
ps Remember Blackstone.
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rffrydr
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Joined: 30 Oct 2005
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Location: Sunny California
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| Posted: Mon Nov 17, 2008 7:24 pm Post subject: |
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Well no sight of the "trillions" but here comes 4.6 billion:
| Quote: | Deal-hungry China Life
Published: November 17 2008 22:03 | Last updated: November 17 2008 22:03
AIG of the US showed that insurance is neither strait-laced nor safe. China Life wants to go one better and prove the industry has guts of steel. Undeterred by global recession and volatile markets, China’s biggest insurer is embarking on an overseas shopping spree. Put another way, the $86bn company is calling the bottom of the market. Exactly how much it proposes to blow, however, and where, is for the moment unclear.
There is little in the (short) canons of Chinese insurers to suggest their investments pay off. China Life’s smaller rival Ping An has destroyed nearly $3bn of value through its holding in Europe’s Fortis. Policy holders’ money ploughed into domestic equities has also evaporated. China Life recorded a $1.2bn loss on its investments in the first nine months of the year, equivalent to two-thirds of operating profit.
Even yields on bonds and deposits – staple fodder of Chinese insurers’ investment portfolios – are faltering after a series of interest rate cuts by the central bank. None of this, of course, is good news for the insurers’ shareholders either. Returns on equity this year are likely to be about half the 22.5 per cent notched up last year.
Going further afield, to presumably far more mature markets, is not an obvious way to reverse that trend. At best, China Life can hope to pick up decent assets on the cheap that will provide a stable if dull income stream once the industry normalises. Only by paying bottom dollar can it hope to squeeze out returns since any cost synergies will be minimal.
China Life has $4.5bn of cash on its books and its shares are valued at a robust 25 times this year’s consensus earnings, more than double the sector average. That, and a phalanx of under-employed investment bankers, appears to have turned its head. |
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