Government Fund Weekly News Roundup — SWFs Target Southeast Asia

April 15, 2016 by SWC Editors

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Jakarta, Indonesia

In the news this week: China Investment Corp. and Singapore’s GIC eye emerging-market assets. Several government funds invest in a new Hong Kong-based real estate vehicle. And Norway’s SWF begins divesting from coal-reliant companies.

Emerging Opportunities

Government funds continued to target investments in emerging markets this week, focusing on economies in Southeast Asia.

On Friday, Singapore’s GIC announced its first investment in Indonesia’s logistics sector. The fund has formed a joint venture with Jakarta-based real estate developer Mega Manunggal Property to build warehouses in the country.

As GIC’s CIO Lim Chow Kiat told the Sovereign Wealth Center in a recent interview, the fund is looking at opportunities in Singapore’s "backyard" because the city-state’s neighboring economies boast a young — and increasingly affluent — consumer base. The rising spending power of middle-class consumers is benefiting the region’s e-commerce industry — and boosting demand for warehouses and delivery hubs.

China Investment Corp. (CIC) is also reportedly set to invest in Southeast Asia. The Chinese fund is bidding for a portfolio of geothermal energy assets in Indonesia and the Philippines that U.S.-based multinational oil giant Chevron Corp. is looking to offload.

Chevron’s revenue has been hit by the plunge in global energy prices since 2014 and the company hopes the sale of its Southeast Asian power plants will generate up to $3 billion to bolster its cash reserves. CIC will face competition for the assets from local power companies, including Malaysia's Malakaff Corp. and Filipino geothermal energy specialist Energy Development Corp.

Chinese Real Estate

China’s GDP growth slowed over the first three months of 2016 to 6.7 percent, down slightly from the previous quarter, according to the latest economic data. But government funds continue to invest in China, demonstrating their confidence in Beijing’s efforts to effect a structural transition to a more consumer-driven growth model.

This week, several unnamed state investors allocated capital to a new China-focused real estate fund being launched by Hong Kong-based private equity firm Gaw Capital. Gaw has raised $700 million for the fund to date and aims to hit a target of $1.3 billion before the end of the year.

The company may have drawn on its existing relationships with government investors as it started its capital-raising for the new vehicle. The New Zealand Superannuation Fund and Singapore's Temasek Holdings have invested in Gaw Capital's previous real estate funds, while the Korea Investment Corp. teamed up with the Chinese firm to acquire the Intercontinental Hotel in Hong Kong for $940 million in 2015.

Norway’s SWF Excludes Coal-Reliant Companies

Norges Bank Investment Management (NBIM), the arm of the central bank that oversees Norway's sovereign wealth fund, Government Pension Fund Global, announced on Thursday that it has excluded 52 companies from its portfolio because they breach its investment guidelines over the use of coal.

In June 2015, Norway's Parliament voted in favor of a plan to ban the fund from investing in companies that derive 30 percent or more of their revenue from coal mining or coal burning for energy generation. NBIM has been assessing the fund's portfolio to gauge its exposure to such companies since late last year and expects to complete this process by the end of 2016. The management team will sell the fund's stakes in the 52 companies it has recently identified.

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