The Chinese press dubbed it "Black Monday." On August 24,
the Shanghai Composite Index fell 8.5 percent, its biggest
one-day drop since 2007. Shockwaves rippled across global
markets as investors fretted over Beijing’s
ability to handle the market crisis.
Over the past few months, the Chinese government had
instructed state-owned entities — such as Central
Huijin, the domestic investment unit of the $747 billion China Investment Corp.
support the market by buying up Chinese shares, but now
lawmakers seem to have conceded that such intervention is
futile. In a blog post published on Monday, Central Huijin
Vice Chairman Li Jiange wrote that "the issues of the
market should be handled by the market itself."
For now, China's ongoing market turmoil is likely to
encourage its government funds to invest their capital in
perceived safe havens, such as British infrastructure
. The U.K. has
proved particularly attractive to CIC and the $600 billion
State Administration of Foreign
because of its stable regulatory environment
and pressing need for foreign capital to finance
Beyond China, sovereign wealth funds’
balance sheets have been affected by the Shanghai slump.
Yngve Slyngstad, CEO of Norges Bank Investment Management,
the arm of the central bank that manages
Norway’s $870 billion sovereign wealth fund,
Government Pension Fund Global,
admitted that the fund’s investments had lost
5 percent of their value over the past month thanks to the
Chinese rout. Singapore’s $194 billion Temasek Holdings and the $53 billion
Alaska Permanent Fund Corp., which
also have large exposures to China, are likely to have
sustained heavy losses, too.
However, fluctuations in Chinese equities are unlikely to
worry these investors unduly — sovereign funds
invest over decades, and NBIM and Temasek have expressed
confidence in China’s longer-term prospects.
Neither do they appear concerned about potential spillover
effects across the region; both funds were reportedly
pursuing big-money deals in East Asia this week.
East Asia Deals
NBIM, for instance, is reportedly bidding for Asia
Square Tower 1, an office building in
Singapore’s business district. The current
owner, New York-based asset manager BlackRock Investment
Management, put the building up for sale at the beginning
of the year. The property has also attracted interest from
Singaporean real estate firms CapitaLand and Keppel Land,
both of which are portfolio companies part-owned by
Temasek and its Singaporean peer, the $343 billion
sovereign wealth fund GIC, have submitted rival bids for
Seoul-based Homeplus, the South Korean unit of British
supermarket giant Tesco. Temasek has formed a consortium
with South Korea's National Pension Service and Seoul-based
private equity firm MBK Partners, while GIC has teamed up
with its regular deal partner, Washington D.C.-based
Carlyle Group. According to media reports, Tesco is keen to
close the deal as quickly as possible and is seeking to
raise around 6 trillion won ($5 billion) from the sale.