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China’s ASEAN Investment Fund Seeks to Raise $3 Billion

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The China-ASEAN Investment Cooperation Fund (CAF) – a dollar-denominated private equity fund formed under direction of China’s State Council in 2010 that targets investments in infrastructure, energy, and natural resources in Southeast Asia – has reportedly begun reaching out to prospective investors for phase two funding.

With the US$ 1 billion it received in starting capital during the first phase wrapped up in companies in Cambodia, Laos, Myanmar, the Philippines, and Thailand; the CAF now aims to raise up to US$ 3 billion in additional funds, and US$ 10 billion over the long haul.

Southeast Asia Investment Strategy

The fund will need every dollar it can get if it’s to support its mission of deepening China’s economic influence within the 10 member-states of the Association of Southeast Asian Nations (ASEAN), which lies at the center of Beijing’s ambitions for bringing the region under its continent-spanning One-Belt One-Road initiative. Introduced in 2013 by China President Xi Jinping, the project envisions a modern-day revival of the Silk Road trade routes that once ran unfettered over land and sea, allowing goods of all kinds to be traded across the regions of ancient world, and which derive their name from the highly lucrative Eurasian silk trade that propelled China into a golden age of economic and diplomatic prosperity.

CAF is one of a handful of quasi-state investment funds created by Beijing over the past decade for the purpose of realizing its vision of global commerce. The much larger, US$ 40 billion Silk Road Fund established in 2014, for instance, focuses on supporting businesses rather than the financing of individual projects. China’s commercial and policy bank – including the China Development Bank (CDB) and Asian Infrastructure Investment Bank (AIIB) – are also heavily involved, having received US$ 82 billion for such projects from the central government. Together, they pump capital into countries all along the Silk Road corridor, from Mongolia to Montenegro.

What the Capital is for?

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SWFI First Read, March 20, 2019

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Bentall Kennedy Buys Stockton Logistics Center

Bentall Kennedy, through a U.S. fund it manages, acquired a NorCal Logistics Center in California for US$ 105 million. The property is located at: 4611 Newcastle Rd, Stockton, CA 95215.

Point Raises $122 Million

Point is a company that provides shared home equity financing. Point raised US$ 122 million in funding in an investment round led by Prudential Financial and DAG Ventures. Other investors in the round include Andreessen Horowitz, Ribbit Capital, Bloomberg Beta, Financial Venture Studio, and Enterprise Community Partners.

FBI Probes Boeing over 737 MAX

The Seattle Times reports the U.S. Federal Bureau of Investigation (FBI) is conducting a criminal probe into the Boeing 737 Max. Part of the probe includes whether Boeing staff had unduly influence and possible kickbacks to government officials at the Federal Aviation Administration (FAA).

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Cassa Depositi e Prestiti Guides Companies to Find Opportunities in Naples Region

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The Cassa Depositi e Prestiti Group (CDP) and its investee companies, which include Fincantieri, Italgas, Snam, and Terna, have reached an agreement with the Municipality of Naples and the Authority of the Central Tyrrhenian Sea Port System. The entities will cooperate to provide for the development of Naples and its surrounding area. There will be a focus on helping the institutions and the community at large through financial support, real estate, and infrastructure investment, and support for local businesses. Signatories can help to provide technical expertise and planning, loans, and oversee public projects. Further, assistance and consulting will be provided, particularly as they relate to interventions and renegotiation of contract terms for the purposes of freeing up capital. Sustainable mobility will be a priority, with natural gas and biomethane forming the core fuels of the future. The group will be developing the ports, which will include the construction of emission-reducing structures.

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PIVOT: Federal Reserve Signals Zero Rate Hikes in 2019

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The Federal Reserve made a decision to hold interest rates steady and indicated that no more hikes will be coming for 2019. Federal Reserve Chairman Jay Powell addressed the media saying that the Chinese and European economies have slowed ‘substantially’. Despite low U.S. employment, Powell explained to the media that the U.S. has the lowest labor force participation rate among developed nations.

There were four interest rate hikes in 2018.

The Federal Reserve committee intends to conclude the reduction of its aggregate securities holdings in the System Open Market Account (SOMA) at the end of September 2019. Essentially, the Federal Reserve is ending quantitative tightening in September 2019. Furthermore, the committee intends to slow the reduction of its holdings of Treasury securities by reducing the cap on monthly redemptions from the current level of US$ 30 billion to US$ 15 billion beginning in May 2019.

In a March 20, 2019 statement called “Balance Sheet Normalization Principles and Plans”, a portion of it reads, “The Committee intends to continue to allow its holdings of agency debt and agency mortgage-backed securities (MBS) to decline, consistent with the aim of holding primarily Treasury securities in the longer run.

Beginning in October 2019, principal payments received from agency debt and agency MBS will be reinvested in Treasury securities subject to a maximum amount of $20 billion per month; any principal payments in excess of that maximum will continue to be reinvested in agency MBS.

Principal payments from agency debt and agency MBS below the $20 billion maximum will initially be invested in Treasury securities across a range of maturities to roughly match the maturity composition of Treasury securities outstanding; the Committee will revisit this reinvestment plan in connection with its deliberations regarding the longer-run composition of the SOMA portfolio.

It continues to be the Committee’s view that limited sales of agency MBS might be warranted in the longer run to reduce or eliminate residual holdings. The timing and pace of any sales would be communicated to the public well in advance.”

source: Federal Reserve website

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