For many investors who don’t have experience in Asia, figuring out what Beijing is up to is both puzzling and difficult. But a handy little tool called a “Form 13F” can help.
In case you’re not familiar with it, the 13F is a disclosure document that the U.S. Securities and Exchange Commission (SEC) requires institutional-investment managers to file when they hold $100 million or more of certain U.S.-listed stocks.
China’s $300 billion sovereign wealth fund (SWF) – the China Investment Corp. (CIC) – just filed its first-ever 13F with the SEC, revealing that it purchased about $9.6 billion worth of U.S. stocks last year.
And it confirms much of what we’ve been telling you since the global financial crisis began – namely that China would take advantage of the crisis by purchasing beaten-down stocks, resources, and hard assets … and in a big way.
Even more important, this filing hints at what China is likely to do next – an insight that will help investors figure out where to put their money in order to maximize their personal profits.
CIC holds 84 securities, according to its 13F filing. What’s more, it shows there was significant buying throughout 2009 – with a special focus on Exchange-Traded Funds (ETFs), which now account for 25% of CIC’s self-invested U.S. shares.
The fund began 2009 with a mere $297.5 million in assets, and ramped up its investment activities during last year’s third quarter, when global securities prices were especially appealing. CIC ended the year with total U.S. stock holdings worth $9.63 billion – a staggering 3,136% increase.
CIC disclosed stakes, mostly small, in more than 60 companies, including:
* $498 million in the U.S.-traded stock of Brazilian miner Vale SA (NYSE ADR: VALE).
* $333 million in Visa.
* $29.8 million in Citigroup.
* $19.9 million in Bank of America Corp. (NYSE: BAC).
* $14.7 million in American International Group Inc. (NYSE: AIG).
* $9 million in Coca Cola.
* $6.3 million in Apple.
* $4.1 million in News Corp. (Nasdaq: NWSA).
* $1 million in Canada-based Research in Motion Ltd. (Nasdaq: RIMM).
“It looks like they are aware of their market power in commodity markets and want to hedge against the impact their buying has on commodity prices,” Timothy Condon, chief Asian economist with ING Groep NV told Bloomberg. “I think the reserves, via the CIC, will be used to hedge the risk of a cutoff of key raw material supplies by buying stakes in commodity producers.”
Finally, CIC made sure to mix in a healthy exposure to markets outside the United States. That includes stakes in the iShares Emerging Markets Index (NYSE: EEM), iShares MSCI Japan Index (NYSE EWJ), and the iShares MSCI EAFE Index Fund (NYSE: EFA).
In addition to these holdings CIC has reported stakes exceeding $6 billion in several Hong Kong- and London-listed equities, as well as the debt of Malaysian and Indonesian coal companies. The sovereign wealth fund also has been buying stakes in Australia’s biggest banks. CIC last fall paid $646 million for a stake in Noble Group – a diversified commodities company based in Hong Kong.
CIC will likely broaden its investments in emerging markets this year, particularly in Brazil and Russia where it has made some initial contacts and where opportunities are plentiful, Lou Jiwei, the sovereign wealth fund’s chairman, said in January.
“Emerging markets no longer rely on capital from the outside,” he said. “Emerging markets are key for stabilizing the world economy.”