GIC bets big on Chinese debt

GIC is betting on China private bonds. China is relaxing its regulation on private company bonds recently, and GIC seems very optimistic on the prospect of China bond market.

The key point is those private bonds are unrated.

GIC bets big on Chinese debt

Singapore sovereign wealth fund GIC is making waves in the Asian debt markets with a series of unusually big investments in bonds from China.

According to market sources, in recent weeks, GIC has bought US$700 million ($877 mlllion) of unrated 4.7% bonds due 2019 from computer maker Lenovo, a US$400 million 2019 private placement from property developer Vanke, and a HK$2 billion ($323 million) 3.2% 2020 note from internet group Tencent Holdings.

Adding to the sudden increase in activity, the fund is said to have been behind the anchor order for the US$350 million reopening of China Resources Land, as well as a big buyer in several other transactions.

The investments in unrated bonds and private placements mark a newly aggressive approach from GIC. It also contrasts with the liquidity-driven investment philosophy of other sovereign wealth funds, which typically prefer to invest taxpayers' money in high-rated and well-traded securities. "A US$700 million order for an unrated bond is a big thing for a sovereign wealth fund," said one banker.
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http://www.theedgesingapore.com/the-dail...?showall=1

in recent months the SGD have been strengthening against the CNY as per yahoo finance. this seems partly a bet on the strength of these international chinese business but also the currency

how come unrated bond gic dare to invest money? whose money used for that?

(09-06-2014, 09:47 AM)Drizzt Wrote: in recent months the SGD have been strengthening against the CNY as per yahoo finance. this seems partly a bet on the strength of these international chinese business but also the currency

It is a valid concern on the unrated bond investment, with investment grade return. What do you think?

The GIC might have a good reason for that, but it remains as a valid concern.

In some sense they are contrarian. They have been betting on Brazil as well. However, their focus on China is broadly in line with GLC linked corporates are heading - Capland, Kepland etc.

However, it is definitely not in line with tycoons like KS Li or Charoen.

Only time will tell especially when GIC has the financial muscle.

Unrated can be due mainly to 2 reasons: either too poor rating or companies too small; or too big to be bothered/ already have existing bond ratings for other issues. Lenovo, Vanke and Tencent sounds like the latter

GIC is buying bonds... not the same as equity/ assets that Superman is disposing.

(09-06-2014, 09:51 AM)sgd Wrote: how come unrated bond gic dare to invest money? whose money used for that?

Lenovo, Vanke & Tencent are well established companies in China, leaders in their respective industries, I personally would consider them safe bets.

The 3.2% yield on the Tencent notes is too low.. Lower than the inflation rate in China..

(09-06-2014, 09:47 AM)Drizzt Wrote: in recent months the SGD have been strengthening against the CNY as per yahoo finance. this seems partly a bet on the strength of these international chinese business but also the currency

The article seems to suggest it is USD and HKD denominated bonds rather than RMB denominated issues.