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  • Beijing Bids up China's Stock Markets 0 comments
    Oct 14, 2009 8:51 AM
    China's equity index climbed 1.4% on Tuesday, riding on state investments.

    Beijing-based Central Huijin Investment Ltd, the giant local arm of China Investment Corp., (CIC), the $300 billion sovereign wealth fund (SWF), bought large chunks of shares in the nation’s biggest banks, including the Industrial and Commercial Bank of China (ICBC), to propel its markets.

    Huijin’s activity is hot on heels of a weekend statement by Beijing, on increasing the investment ceiling in its stock markets for the so-called qualified foreign institutional investor or QFII, by 25% from $800 million to $1 billion.  

    Beijing had originally announced the new draft rule to raise the QFII ceiling early September, after the Shanghai index slumped 23% in August.  

    Gao Xiging, CIC’s president, made a public statement end August on the SWF's plans to invest some $50 billion in 2009. CIC is an aggressive acquirer of international natural resources.  

    The huge sell-off in local equities in August resulted from a drop in Chinese bank lending activity that spooked global investors, who were betting on its economy rolling back on track, buoyed by Beijing’s $586 billion stimulus program and robust credit growth.  

    The Shanghai index had rallied more than 100%, from a bottom in November 2008 to July 09. The index' 60% gain this year so far, is unspectacular compared to some other key emerging markets such as Russia’s, up 120% in 09.  

    Central Huijin was originally set up to hold equity and enhance value of state-owned financial institutions. The firm has evolved into a massive intervening machine in Shanghai’s markets, executing vast insider buying and selling, on behalf of the state.    

    Ashby H. B. Monk, a research fellow at the University of Oxford, in an end August 09 report on SWFs, refers to the Western anxiety about political investments by Huijin. “While the objective over the long term may be to make money, there are clear and obvious political undercurrents.”    

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