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18 Feb 08
Australia has attracted sizeable investments from some of the world’s biggest and most established sovereign wealth funds.
The most active are arguably the Singapore twins – Temasek and the Government of Investment Corporation – both of which have long been players in key sectors of the Australian economy.
Neither Temasek nor GIC publish the value of assets by locations, but collectively they easily own more than $20 billion of holdings in Australia.
Combined, the two Singapore investors represent the world’s second-largest sovereign wealth fund, with assets totalling $US489 billion ($539 billion), according to Morgan Stanley.
But in coming years, the Singapore investors may be overshadowed by the new “financial superpower” – China Investment Corporation, China’s sovereign wealth fund formally launched last year.
CIC currently has assets of $US200 billion, but will ultimately be responsible for managing China’s $US1.5 trillion foreign reserves.
Since the late 1990s, Australia is said to be one of several key countries targeted for Chinese investment – mainly to secure long-term supply of raw commodities.
CITIC (the former China International Trust and Investment Company) became the first of the cashed-up Chinese state-owned enterprises to invest when it took a 10 per cent stake in Portland Aluminium Smelter in Victoria in 1987.
Since then, Chinese government-backed enterprises have invested in a diverse range of sectors, from cotton fields to infrastructure and iron ore and coal mines.
In the past 12 months alone, the FIRB has approved Chinese investments totalling almost $5 billion in Australian companies.
Two existing Chinese investors, Anshan Iron & Steel and Shougang Steel, have pledged to co-invest in expanding infrastructure and mines, totalling almost $4 billion, in their respective investments.
Wealth funds have come into their own in the past two years, and especially in the past few months, when they rode to the rescue of the world’s largest financial institutions, crippled by the fallout from the US sub-prime mortgage crisis.
So far, the SWFs, including Temasek, have injected $US69 billion into the likes of Merrill Lynch, Citigroup and UBS.
Morgan Stanley economist Stephen Jen, who monitors 29 SWFs worth $US2.9 trillion, says over the next five years funds under management may grow by about $US1 trillion annually. He estimates that SWFs will have some $US12trillion under their control by 2015.
Temasek’s landmark investment in Australia is through its subsidiary Singapore Telecom (SingTel), which paid $14 billion in 2001 for Optus, then owned by Cable & Wireless.
Last July, another Temasek subsidiary, CitySpring, bought underwater electricity cables BassLink for $1.2 billion.
CapitaLand, also associated with Temasek, which owns 55 per cent of the listed property company AustraLand, is said to be looking over the portfolio of shopping centres owned by the troubled listed trust, Centro.
Since 1996, the real estate arm of GIC, known as GIC RE, has spent almost $3 billion building a portfolio of prime Australian assets located mostly in Sydney and Melbourne.
Last year, GIC RE joined a consortium that paid $600 million for the Melbourne Myer store, earmarked for redevelopment, costing $1.2 billion. It also acquired a half share in Westfield Parramatta for $717.5 million.
Childcare company ABC Learning was Temasek’s first direct investment in Australia, for which it paid $401 million for a 12 per cent stake last year.