GIC buys China’s Shanda Games stake, eyes deals

November 19, 2009
Singapore Democrats

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Saeed Azhar

GIC, Singapore’s biggest sovereign wealth fund, has bought a 5.4 percent stake in Chinese videogames company Shanda Games, its second recent investment in a newly listed firm in the United States.

The move comes after the Government of Singapore Investment Corp (GIC) said in late September that it was looking for opportunities after it decided to move into riskier investments in early 2009. The fund had reduced exposure to listed stocks by 10 percent between July 2007 and September 2008.

GIC bought 4.4 million U.S. shares of Shanda Games, currently valued at about $47 million, according to a regulatory filing a few weeks after Shanda completed a $1 billion initial public offering.

The investment shows how large investors are piling into China’s gaming frenzy. In September, Shanda’s IPO was the first $1 billion U.S. IPO for 17 months.

“The game market has very strong growth driven by increasing internet penetration and consumer growth in China,” said Dick Wei, a Hong Kong-based analyst at JPMorgan.

“For the past two years the market grew more than 50 percent year-on-year. That high growth rate is unsustainable, but I think maybe the 25-30 percent growth rate should be sustainable over the next few years,” Wei said.

From hotel to property

Last week GIC announced a 6.9 percent stake in Hyatt Hotels Corp, which raised $950 million in an IPO.

GIC is becoming active again after its portfolio shrank 20 percent in its last financial year that ended in March when it was hit by the financial crisis that drove down the value of its financial holdings such as UBS.

A market recovery helped it recoup half of its losses since then and GIC recently profited from a well timed sale of part of its Citigroup shares after it converted its preferred shares into stock.

GIC’s recent investments have been diverse — hotel industry, videogaming firm and China’s property developer Longfor, but is in sync with its recent statement that it is not pursuing geographical targets.