China’s $300 billion sovereign wealth fund is asking the government for more funds after a 10 percent mark-to-market loss in May and June amid the European debt crisis, said Executive Vice President Jesse Wang.
“We believe the overall recovery is on track,” Wang of China Investment Corp. said at a conference in San Francisco yesterday. “We still anticipate the S&P 500 will go to 1,250” and may do so “before the end of the year.” The Standard & Poor’s 500 index has fallen 4.8 percent this year to 1,062.
The U.S. economic recovery is proceeding “better than expected” with the nation’s markets remaining the world’s most- liquid and mature, Wang said. A Feb. 9 filing with the U.S. Securities and Exchange Commission shows CIC resumed investing in U.S. equities, primarily through index funds rather than individual stocks, after suffering initial losses on Morgan Stanley and Blackstone Group LP investments.
Discussions to obtain more funds from the Chinese government are ongoing, Wang said. CIC, which has 24.68 percent of its holdings in public equities markets, is barred from investing in China, Wang said.
The sovereign wealth fund holds about 18 percent of its assets in fixed-income securities, 8.8 percent in inflation- linked products, and 9.4 percent in investments such as hedge funds, he said. Almost 7 percent is held in private-equity funds, Wang said.
In remarks at the Federal Reserve Bank of San Francisco’s Asia Banking and Finance Conference, Wang said emerging markets are no longer undervalued and that China has few alternatives to holding its currency reserves in Treasuries. China is the largest overseas owner of U.S. Treasury securities.
“Under the current system, I don’t think you have many other options,” Wang said. Significantly reducing a reliance on U.S. government debt would involve changing the global monetary system, he said.
“The U.S. is still the deepest, most liquid and mature market,” Wang said.
The following is a breakdown of China Investment Corp.’s holdings, according to Executive Vice President Jesse Wang.
Public Equity Markets 24.68% Fixed income 18.29% Anti-inflation assets 8.83% Absolute return 9.41% Private equity 6.97% Special Situation 18.9% Cash 8.59% Others 4.33%