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Is it SAFE?
Mar 14th 2011, 15:11
CHINA'S SAFE investment company has hit on an investment strategy to suit its
name: take small and discreet stakes in large FTSE 100 companies. The
sovereign-wealth fund is a subsidiary of the State Administration of Foreign
Exchange, which manages China s foreign-currency reserves and itself comes
under the auspices of the central bank. An analysis by The Economist shows that
SAFE has disclosed holdings in FTSE 100 companies worth 13.8 billion ($22.1
billion), which is around 0.74% of the index s overall market capitalisation.
According to share registrars data on Bloomberg, the fund has stakes in 63 of
the FTSE 100 s constituent firms, with holdings varying in size from 0.18% in
the Royal Bank of Scotland to 1.63% in ARM Holdings, a technology firm. (A full
list of the fund s disclosed holdings can be found here.) Its biggest
investment by value is in Royal Dutch Shell; energy and basic materials are the
two sectors that attract most of its cash (see chart).
Other patterns are difficult to decipher. SAFE has put money in Barclays but
not in Standard Chartered, invested in Severn Trent but avoided Scottish &
Southern Energy. Perhaps the question is wrongly framed. It is possible that
SAFE has stakes in all the FTSE 100 constituent companies: there is a lag in
the data provided by registrars, after all, and stakes may also be held via
third parties.
Whatever the truth, London s financial markets ought to be happy that China is
spreading its money around without much effort at disguise. By contrast, the
SAFE does not hold disclosed stakes in any of the 30 members of the Dow Jones
Industrial Average. Is it absent or just hiding?