About four months ago, China's sovereign wealth fund, China Investment Corp., announced that it would up the amount of money it pours into foreign investments by 30%. Now, CIC has about $90 billion to spend on assets abroad.
CIC has some complex dealings with internal state-owned banks, like the Agricultural Bank of China and China's Development Bank. Not surprising, since on of CIC's major funtions, indeed, the reason it was formed at all was to provide financial stability for China's state-owned banks.
Near the end of last week, China's Development Bank signed a $100 million loan contract with Banco de Chile (BCH:NYSE).
BCH is Chile's second largest bank, and has also signed an agreement to open joint credit lines with CDB. According to the press release, CBD wants to invest in Chile's "ports, bioceanic corridors and junior mining companies.
Chile is a major producer of copper, which is of great import to China. In fact, China's capital investment in infrastructure like roads, factories, and property climbed 27.3% in the first half of 2008. That's more than was expected, and this continued growth is sure to keep demand high for industrial metals like copper.
This should come as no surprise to any of you who have been keeping up with the sovereign wealth fund story. Barely a month ago, Kuwait announced it would boost investments in stocks, bonds and real estate in China, India and Japan.
But I did find one interesting story...
Turns out emerging markets are investing in developed nations, too. You already know about Asian and Middle Eastern funds picking up stakes in U.S. financial institutions...
What was surprising to me was that an Egyptian bank pumped $5.97 million into the UK's Panmure Gordon, a British stockbroker and investment bank. EFG-Hermes (EFGZF.PK) is Egypt's largest investment bank, and this $6 million investment gets it a 9.97% stake in Panmure Gordon (PMR:London).
This stake will create more opportunities and access for each company's clients. As London has become a financial capital of the world, with a number of Middle Eastern ties, this move makes perfects sense for both parties.
It's just another step up in the world for emerging and frontier markets...
