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China’s SAFE is biggest public sector holder of equities

China’s SAFE is biggest public sector holder of equities

Staff Reporter

2014-06-19

Central banks worldwide have become major players in global equity markets, with a recent report showing that China’s State Administration of Foreign Exchange (SAFE) is the largest public sector holder of equities, according to Shanghai’s China Business News.

A report by the Official Monetary and Financial Institutions Forum (OMFIF) showed that central banks are experiencing a decline in income due to low interest rates, with some central banking investors becoming major investors in the equity markets, which could potentially overheat asset prices.

Among the global central banks that have sped up investment in the stock market, China stands out. The report indicated that SAFE, which operates under the People’s Bank of China, the country’s central bank, is the world’s public sector equity owner and administers US$3.9 trillion in foreign exchange reserves.

The Chinese central bank has been directly buying minority equity stake in important European firms. SAFE’s interest in Europe could be seen as part of China’s strategic move because it has helped counterbalance the monopolization of the US dollar, which also reflects China’s ambitions in the global finance sector, according to the report.

The OMFIF reached the conclusion based on the US$29.1 trillion market investment made by 400 public sector institutions in 162 countries.

In addition to central banking investors, the equity market’s ability to draw capital can be seen in the large hedge funds.

A report released by the Bank of America Merrill Lynch last Friday showed that global equity funds attracted US$11.4 billion on June 11, which was the largest since February.

Meanwhile, EPFR Global data also reflected that the equity fund market in emerging countries also drew new capital of US$2.3 billion, the largest capital inflow during the last nine weeks.

The policy of maintaining low interest rates has contributed to economic revival in economies headed by Europe and the United States, but it has also stimulated global central banks to accelerate investment in the equity market. However, the European Central Bank’s adoption of negative interest rates in June has widened the scale of the global quantitative easing policy, in which low interest rates are likely to linger for a longer period of time and further create an ideal environment for arbitrage trading.

 

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About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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