Thursday, March 27, 2008

China Investment Corp suffers huge loss in book value

Chinese institutional investors such as China Investment Corporation (CIC) are facing huge losses in overseas investment because of the turmoil in global markets caused by the U.S. subprime mortgage meltdown.

CIC is likely to suffer 48% loss in terms of book value in its investment in the Blackstone Group, in which It injected US$3 billion to buy the U.S. private equity firm's shares at US$29.605 apiece last May. However, the current market price of the Blackstone has plunged to US$15.45.

At the end of last year, CIC purchased US$5 billion equity units of Morgan Stanley, which are expected to be converted to common shares in 2009. The transaction price was set between US$48.07 and US$ 57.684 apiece. The latest price of Morgan Stanley, however, hit US$49.67 per share, 3% higher than the lower end.

In addition, other Chinese commercial institutional investors recently have also being active in expanding in Europe and the U. S. In November 2007, Ping An Insurance (Group) Co<601318><2318>, China's second-largest insurer, acquired 4.18% of Netherlands's Fortis for EUR 1.81 billion, or EUR 19.05 apiece. It also sees a gross loss of 16% calculated by the latest market price of Fortis, which was EUR 15.16 per share.

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