26/07/23

ASIA: Singapore's GIC bets on China after scoring 8-year-high returns

As published on: reuters.com, Wednesday 26 July, 2023.

Singapore sovereign wealth fund GIC (GIC.UL), one of the world's biggest investors, plans to continue investing in China despite geo-political tensions after chalking up its best showing in eight years in the financial year ended March.

Its group chief investment officer Jeffrey Jaensubhakij told Reuters GIC was keen to invest in Chinese companies that do business within China and do not export to the United States.

"There are some 'China for China' type of investments that still make sense," he said.

GIC's annualised 20-year real rate of return - its main performance gauge - for the year ended March 2023 stood at 4.6%, the highest since 2015, according to its annual report released on Wednesday. This compares with 4.2% over the same period a year ago.

The group, which counts e-commerce giant Alibaba (9988.HK) and fintech affiliate Ant Group among its Chinese investments, said its diversified portfolio and cautious investment stance helped cushion its portfolio's performance from the market correction in 2022.

GIC said exposure to China was important for a diversified portfolio.

"It is a place that we believe that global investors which hope to build a diversified portfolio must have exposure or presence," GIC's Chief Executive Officer Lim Chow Kiat said.

GIC's continued commitment to China comes as Beijing scrambles to re-energise a flagging post-pandemic recovery.

Chinese shares rose this week after its leaders pledged to step up support for the economy.

Financial regulators told major global investors in a rare meeting last Friday that China was prioritising economic growth and would stay open to foreign capital, sources familiar with the matter said.

GIC said China now has more regulatory clarity and business confidence is returning.

Its views follow that of smaller investment firm Temasek which earlier this month offered a positive outlook on China's tech sector.

GIC invests $10 billion to $20 billion a year in infrastructure assets, a portfolio that has grown five-fold since 2016, as the investment provides diversification and steady, inflation-protected returns, said Ang Eng Seng, GIC's Chief Investment Officer for Infrastructure.

GIC is also looking to allocate more capital to private credit, a nascent asset class which has delivered strong returns in a higher interest rate environment with tighter liquidity from banks, Jaensubhakij said.

GIC is the world's seventh-biggest sovereign investor with $690 billion in total assets, according to research firm Sovereign Wealth Fund Institute.

The U.S is GIC's biggest market, making up 38% of its portfolio, while Asia excluding Japan contributed 23%.

The share of emerging market equities in GIC's portfolio rose to 17% by end of March from 16% a year earlier.

Real estate rose to 13% from 10%, while nominal bonds and cash dropped to 34% from 37%.

GIC's Lim warned of continued inflation pressure that has caused bond markets to plunge over the past year.

"The underlying inflation driver has not completely gone away," he said. "There is still pressure for inflation rates to be at elevated levels above whatever the central banks desire."

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Asia Sinagpore China GIC