CIC Invests at Home and Abroad

In China, Top 3 Banks Get Funds; In Indonesia, Resources Push Heats Up By TOM WRIGHT and MICHELLE NG SHANGHAI -- Central Huijin Investment Ltd., an investment arm of China's $300 billion sovereign-wealth fund China Investment Corp., will continue buying shares in the country's three largest banks over the next year to reassure investors and stabilize the stock market, the lenders said Monday. Last month, Huijin completed a year-long program to buy shares in Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and Bank of China Ltd. on the open market. Huijin, which already was the principal shareholder of the three lenders, launched the program after the markets were hit by the global financial crisis. View Full Image Associated Press Central Huijin Investment holds a 67.53% stake in Bank of China. The banks' announcement comes a little more than two weeks before the lockup period on 236 billion of ICBC's yuan-denominated Class A shares held by Huijin and the Ministry of Finance expires Oct. 27. The shares account for 70% of ICBC's capital base and are worth about $170 billion. "Beijing clearly wants to prop up confidence in the markets, as China's markets are liquidity-driven and investors have a habit of fearing excess share supply," said Essence Securities analyst Zhu Haibin. As of Friday, Huijin owned 35.42% of ICBC, 57.09% of China Construction Bank and 67.53% of Bank of China, according to the banks' statements. After the onset of the financial crisis, the Shanghai Composite Index fell to a low of 1664.93 in October last year but has soared since then on pump priming by Beijing and investor confidence that the global economy is recovering. Analysts said Huijin is unlikely to buy a large number of the banks' shares. Huijin has increased its stake in ICBC by a total of 0.01 percentage point and its stake in Bank of China by 0.0021 percentage point in the previous four trading days. View Full Image Bloomberg News Central Huijin Investment holds a 35.42% stake in ICBC. Huijin was set up to hold stakes in China's state-owned banks six years ago, when the country began a complex restructuring process that transformed the deeply indebted financial institutions into some of the world's biggest and most profitable publicly listed lenders. Separately, CIC is looking to make natural-resource investments in Indonesia through a partnership with PT Bumi Resources, the nation's largest coal-mining company by output, Bumi said. CIC last month agreed to lend $1.9 billion to Bumi, mainly to help the Indonesian company refinance its existing debt, Bumi said at the time. On Friday, a Bumi spokesman said the deal also gives CIC the right of first refusal to partner with Bumi in any future acquisition by the company in Indonesia worth $75 million or more. CIC couldn't be reached for comment. View Full Image Imaginechina/Associated Press Central Huijin Investment holds a 57.09% stake in China Construction Bank. The Chinese fund has in recent months agreed to invest at least $4.25 billion in resource deals in Canada, Hong Kong and Indonesia in an effort to hitch its investment strategy to rising global commodity markets. Indonesia -- the world's largest exporter of thermal coal, used to generate electricity -- is especially attractive because of its huge untapped resources and geographical proximity to China, analysts say. CIC could take stakes in a number of projects that Bumi is looking at developing, said Dileep Srivastava, a spokesman for Bumi. These include the Maruwai coal project in the heart of Borneo island, which the company is "prospecting" before deciding whether to make a bid, he said. Bumi's other projects include a copper and gold mine in Gorontalo province, on the northern part of Sulawesi island, which is also considered to be a potentially large project and is now at the exploration stage. The company also owns a small stake in a joint venture that recently bought a 10% stake in a gold and copper mine operated by Denver-based Newmont Mining Corp. on Sumbawa island. The tie-up with Bumi gives CIC access to Indonesia's energy sector "via an influential local partner," said Adam Worthington, an analyst in Singapore with Macquarie Capital Securities. A Bumi spokesman said the deal with CIC could give the company access to future cheap loans from Chinese state-owned banks for new acquisitions, a benefit that may reduce its total interest costs over the medium term. —Rose Yu Write to Tom