SWF moves to commodities, another out of Citi

Here’s a double story on sovereign wealth funds today: first, China’s SWF CIC has announced it will boost its investments in commodities via Noble Group, a Hong Kong-based, Singapore-listed commodity shipping and trading company.  Split between new and existing shares, CIC will be adding another $850m to its allocation to commodities.

From the FT:

Chinese investment in natural resources and power is being driven in part by the fundamental needs of the Chinese economy, which continues to grow at a rapid pace. But the investment is also fuelled by the desire to diversify away from US dollar securities. Chinese officials have repeatedly ex-pressed concern about the dollar, fearing its reserves holdings may be vulnerable to losses if the dollar continues to weaken on the back of massive deficits and quantitative easing.

FT Alphaville splits the investment between “about 438m newly issued shares and about 135m shares from trusts associated with Noble’s founder and CEO, Richard Elman.”  This move follows the same fund’s capital infusion in London’s Canary Wharf as well as talks of possible investments in real estate.  This development is also consistent with Temasek, Singapore’s other investment fund, buying 13.76% stake in Singapore-based commodities supplier Olam International worth $303m or 13.76% equity stake.

As it enters the commodities sector further, another sovereign wealth fund is reducing its holdings in a financial firm.  Singapore’s other fund GIC or Government of Singapore Investment Corp. sold a part of its holdings at Citi to lower than 5% from its about 9% share in the firm after it provided additional capital early this year as the financial giant was on its quest to survive.

Government of Singapore Investment Corp. sold the stock after converting preferred shares in the New York-based bank into a more than 9 percent common-equity stake, it said in a statement. The company, manager of more than $100 billion of foreign- exchange reserves, also has a $1.6 billion paper profit on its remaining holding.

The $1.6bn profit it is booking from this investment came after Citi shares have soared more than 4-fold since its drop to below $1 back in March.

Source: FT, Bloomberg


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