CIC profit surges, return increases

By Liang Fei Source:Global Times Published: 2013-7-28 23:18:01

China Investment Corporation (CIC), the country's sovereign wealth fund, announced Friday that it reported $77.4 billion net profit in 2012, surging nearly 60 percent year-on-year.

The figure is much higher than the 238.7 billion yuan ($38.93 billion) net profit of the Industrial and Commercial Bank of China, which has been called the "most profitable" company on China's A-share market.

CIC just welcomed former vice finance minister Ding Xuedong as its new chairman on July 3.

The company's overseas investment portfolio realized an annualized rate of return of 10.6 percent in 2012, compared with a return of negative 4.3 percent in 2011. And its accumulative annualized rate of return has reached 5.02 percent since its establishment in 2007, according to the annual report posted on the company's website on Friday.

"CIC's increased profit is mainly attributed to a global recovery, especially in the US stock market, since the second half of 2012," Li Daxiao, director of research at Yingda Securities, told the Global Times on Sunday.

The company said that 32.4 percent of its total investment was in long-term investment by the end of 2012, followed by open stock market investment with 32 percent, according to the report.

By the end of 2012, 49.2 percent of CIC's equity investment had gone to the US stock market, 27.8 percent was in advanced economies other than the US and the rest was in the stock markets of emerging economies.

Media reports also said Friday that CIC has been in talks with China's largest e-commerce company Alibaba for a possible stock investment.

CIC's annual report showed that 54.7 percent of its investment in fixed-income securities went to the sovereign bonds of developed economies, while emerging markets' sovereign bonds accounted for 17.5 percent.

Li noted that CIC should be more alert to the increasing risks of investing in sovereign bonds, as return rates have been soaring recently and a bubble could occur.

CIC's total assets reached $575.2 billion in 2012, up from $482.2 billion in 2011, according to the annual report.

As a sovereign wealth fund, CIC should focus more on strategic investments instead of pure financial investments, according to Tian Yun, editor-in-chief of the China Macroeconomic Information Network website.

"CIC should attach more importance to overseas investments in sectors like infrastructure construction, resources and energy, to serve the long-term development of China," Tian said.

CIC investment breakdown


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