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American Fiscal Chaos Pushes Nations to Pursue Yuan

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qingmingWhile Republicans and Democrats in the United States were taking debt negotiations toward another potential cliff, China was not so silently making deals to bypass using the U.S. dollar when handling bilateral trades.

On October 11th Chinese media Xinhua announced an agreement between the European Central Bank (ECB) and the People’s Bank of China (PBOC) to swap currencies to the tune of 350 billion yuan (US$ 57 billion). According to the report, the agreement will last 3 years but may extend longer if both parties agree to extend it.

The deal marks the second largest currency swap the PBOC has made to date. The first being a 360 billion yuan (US$ 58.7 billion) agreement with South Korea that took place in two waves, first in 2009 and then in 2011. The deal is set to expire in October 2014 barring mutual agreement to keep it active.

The increase in currency swaps between China and other foreign central banks suggests a rise or at least further solidification in trade. However, some Chinese exporters are getting nervous as the yuan is starting to gain ground against the dollar. Further currency appreciation, they fear, could negatively affect exports. Chinese officials in Beijing, on the other hand, seem to welcome the strengthening yuan. A stronger currency could mean increased domestic consumption, the sign of a balanced economy.

Open Currency Swap Agreements – China[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

Stephen Gilmore Named CIO of New Zealand Superannuation Fund

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The Guardians of New Zealand Superannuation appointed Stephen Gilmore as chief investment officer. Previously, Gilmore was Chief Investment Strategist at Australia’s Future Fund – holding a series of positions between 2009 and 2018. In a press release, NZSF CEO Matt Whineray said, “We are delighted to have been able to attract a global investment leader of Stephen’s calibre to the Guardians. The NZ Super Fund is expected to grow strongly over the next few years and Stephen’s experience at the Future Fund, one of the world’s leading sovereign wealth funds, will be invaluable.”

Gilmore’s appointment is effective late February 2019.

Gilmore also had roles at Morgan Stanley, Banque AIG, the International Monetary Fund (IMF), and Chase Manhattan Bank.

Image photo is provided courtesy of the New Zealand Superannuation Fund.

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Shaktikanta Das Named as New CB Governor for India

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The Indian government named Shaktikanta Das as the new Governor of the Reserve Bank of India. He will be the 25th governor to lead the central bank. Das is India’s former economic affairs secretary who stepped down in May 2017.

Das replaces Urjit Patel, who stepped down as central bank governor for “personal reasons.”

Urjit Patel had been arguing with India’s finance ministry on matters such as easing lending policies versus what the appropriate size of foreign reserves should be.

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UBS and APG Form Japanese Residential Property Venture

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Long horizon institutional investors are keen on taking advantage of appealing underlying fundamentals in select Japanese residential submarkets that have experienced population growth versus rural areas. The housing market in Tokyo has decoupled from the rest of Japan due to attractive demographics and low interest rates. Real estate valuations for Japanese housing in Tokyo is still at a distance relative to the very-much inflated market of the late 1980s. UBS Asset Management Real Estate & Private Markets business and APG Asset Management, which oversees the assets of Stichting Pensioenfonds ABP, formed a new property joint venture to invest in residential properties in Japan. UBS Asset Management will manage the fund and partnership, while APG will play a strategic role. APG will contribute US$ 175 million into the venture.

This platform will pursue a build-to-core investment strategy with some allocation to the reconfiguration of income-producing operating assets in cities such as Tokyo and Osaka.

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