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China will form world's biggest investment company [Copy link] 中文

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Post time 2007-3-12 18:01:27 |Display all floors

Greendragon's Mayhem

With potentially USD400billion to be invested, it would indeed be mayhem if a cowboy gets his hand on it. Temasek has something like USD60 billion FUM, order of magnitude difference!

For one thing, I think we should reconsider the suitability of programmatic trading if indeed we want to adopt that practice. The thought of some piece of xhitty software triggering an across the board "sell" order petrifies me.

And another thing, if this hugh investment company decides to re-balance its portfolios as an ongoing practice, there will be blood on the trading floors of major exchanges.

Let's see, what would trigger a "sell"? Hmm, RMB appreciates against the USD by 20% and the traders decide to realise their book-profit, ergo, sell. Commodities traders like Greendragon...

Come to think of it, let's do this one step at a time, let's do it slowly.

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Post time 2007-3-13 13:49:53 |Display all floors

Reply #8 cestmoi's post

Then you need to have "more buzz" information....

You'd realize, if the story is true..the sell off in Shanghai was attributed to a....rumour!

ha ha ha

Green Dragon
God of Prosperity

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Post time 2007-3-13 13:51:34 |Display all floors

In fact...the TITANs...

...with their "non rationale" gut feel type of investing....

could be triggers of a lot of MAYHEM in the investment markets, not necessarily stock bourses but include bonds, commodities, reits, forex etc.


Green DRagon
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Post time 2007-3-13 16:13:44 |Display all floors

Thinking about WHAT we want!

Okay, we even have contributors here who recommends studying the charts, sounds like a day-trader to me, a frightening thought!

Take a step back, think about WHAT we want to do before thinking about HOW we want to do it. I don’t think we want to set up a new investment bank or, worse still, send hordes of day-traders to various exchanges.

What we want: :)
• We want to diversify and improve on the RoI;
• We want to be a “trust fund” for the the reserves which belong to the Chinese people;
• There are a lot of investment banks and fund managers who would do it for us, some of these companies have been around for almost a century, we want to harness the experience, know-how and talent of these companies.
• We want them to do the work for China, they are good at it, and to let them compete for the management of slices of up to USD400 billions;
• We want full product disclosures from them and we want them to give the “trust” the most realistic returns possible, or they will miss out.

What we need to do: :)
• We will do full due diligence and check up on these investment banks and fund managers;
• We will need to spread the investments and risks by currencies (trade-weighted); by markets; and by instrument types;
• We will need to re-balance our portfolios periodically along those lines;
• We will need to retain oversight and control over our all the portoflios, therefore, inter alia, daily reports and mark-to-market are mandatory requirements
• We will need responsible and experienced fund managers with long-term, strategic views.

What we don’t want:
• We don’t want to be a disruptive force on any stock exchanges and we certainly don’t want to drive companies to bankruptcies, they can do that very well without us;
• We don’t want to become an investment bank; we don’t want to be a hedge fund; and we are not employing hordes of speculative day-traders studying charts and racing guides.

Hello, calling wholesale bankers and fund managers …

[ Last edited by cestmoi at 2007-3-13 04:21 PM ]

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Post time 2007-3-14 12:47:44 |Display all floors

Reply #11 cestmoi's post

That would be the SAFEST WAY to invest!
Also be the "Base customers" to expand the range and depth of the capital markets.


Green DRagon

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Post time 2007-3-16 11:28:24 |Display all floors

wen press conference

Premier Wen Jiabao just ensured at a press conference in Beijing that forming of such a forex investment company of China, will not  affect China's holdings of U.S. dollar-denominated assets.  

I assume that China government will continue to buy U.S. treasuries, but could buy less & less, I guess, as China's investment company will buy more crucial resources, and foreign companies, too.

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Post time 2007-3-17 15:10:32 |Display all floors

Clarity?

Latest grab from CD:
Setup of state forex company officially discussed
(Xinhua)
Updated: 2007-03-16 16:58

BEIJING -- China's state foreign exchange company, drawn wide attention recently, made its first concrete step towards establishment by holding its first preparatory meeting, China Securities reported Friday.
...

The major aim of the planned company is to improve management of China's huge foreign exchange reserves and generate as more as possible returns on the reserves under the preconditions of security.

Current issues would be the orientation and character of the company, sources were quoted by the newspaper as saying.

"Investment channels of the planned company will include financial securities invested by the Central Huijin Investment," Wu Xiaoling, vice governor of the central bank, was quoted as saying, "and we are talking about some strategic investments."

The planned company would be launched within the year while details such as the capital scale has not been discussed yet, Hu Xiaolian, head of the State Administration of Foreign Exchange, was quoted as saying.

The investment company will issue 200 billion to US$250 billion of RMB-denominated bonds. Money to be raised will be firstly used as strategic investment for energy enterprises like CNOOC, earlier reports said.
...
Links
http://chinadaily.com.cn/china/2007-03/16/content_829858.htm


Central Huijin Investment is also bailing out the Everbright Bank.

As I interpret it, the government is prepared to use a big part of the reserve to bail out moribund, ill managed SoE's before floating them (and thereby getting rid of them).

The CEO's and senior management of these companies will need to be replaced if they are to survive after the have been listed. We are talking about major paradigm shift ie. introducing a wholly new culture to these companies and thinking outside the SoE-box.

We can securitise some of the NPLs (0% return p.a.) by packaging them with high-yield stuff such as credit card debts (say about 16% p.a.) with a component of government  guaranteed stuff (say about 3-4% p.a.). That should make it interesting for people to invest in NPLs. Of course it will be a bonus if a small % of the NPLs does generate a return.

Credit card debt is traditionally risky business but it is set to grow in China whereas, hopefully, NPLs are set to drop. The high returns of the credit cards offset the no returns of SoE and the government component gives the whole securitised construct some stability. In the worse case secenario, the return is the component guaranteed by the government.

If we do that, we can sell units of these securitised hybrid stuff.

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