china buying oil & spdr gold trust

China Becomes Oil ETFs No. 4 Holder, Buys SPDR Gold (Update1)
Share Business ExchangeTwitterFacebook| Email | Print | A A A By Christian Schmollinger and Kyoungwha Kim

Feb. 9 (Bloomberg) -- China Investment Corp., the nations sovereign wealth fund, invested for the first time in the U.S. Oil Fund, an exchange-traded crude-futures fund, joining Morgan Stanley & Co. and Goldman Sachs Group among the top holders.

China Investment became the fourth-largest holder in the Oil Fund by buying 2 million shares, equal to 3.48 percent of the outstanding units, with a value of $78.6 million, according to a Securities and Exchange Commission 13-F filing posted on Feb. 5. It also took a 1.45 million share stake, or 0.4 percent of the total, in the SPDR Gold Trust worth $155.6 million.

Chinese miners and oil companies have bought up zinc mines in Australia, oil reserves in Nigeria, and gold deposits in the Philippines to feed the countrys demand for raw materials to fuel its economic growth. The $300 billion sovereign wealth fund pumped about $10 billion into commodity-related concerns in the second half of 2009.

It looks like they are aware of their market power in commodity markets and want to hedge against the impact their buying has on commodity prices, said Timothy Condon, chief Asian economist with ING Groep NV in Singapore. I think the reserves, via the CIC, will be used to hedge the risk of a cutoff of key raw material supplies by buying stakes in commodity producers.

CICs investments through the SPDR Gold Trust are equivalent to 145,000 ounces of bullion, or about 0.4 percent of the 33.9 million ounces Chinas government maintains, based on data from the International Monetary Fund.

Resource Investments

CIC is considering new investments in resource-related companies this year. They held early talks for direct investments in Brazil, the worlds second-biggest iron-ore exporter, and Mexico, the No. 2 silver producer, Chairman Lou Jiwei said at the Asian Financial Forum in Hong Kong on Jan. 20.

In July, CIC bought 17.2 percent of Teck Resources Ltd., Canadas largest base-metals producer, for C$1.74 billion ($1.6 billion). It acquired an 11 percent stake in a unit of Kazakhstans state-run energy company in late September, two weeks before purchasing 45 percent of Nobel Oil Group of Russia.

In November, it announced investments in U.S. power producer AES Corp. and GCL-Poly Energy Holdings Ltd., Chinas biggest polysilicon producer.

Institutional investor Paulson & Co. holds the largest number of shares in the SPDR Gold Trust with 8.68 percent, or 31.5 million. Goldman Sachs has the biggest stake in the U.S. Oil Fund with 5.3 percent, or 3.045 million units.

To contact the reporters on this story: Christian Schmollinger in Singapore at [email protected]; Kyoungwha Kim in Singapore at [email protected]

Last Updated: February 9, 2010 03:27 EST