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Sovereign Funds Track Developments in Chinese Stock Market

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Sovereign wealth funds are active investors in mainland China’s stock market. Volatility and government interference are key concerns for these large institutional pools of long-term capital. Norway Government Pension Fund Global is active in China’s stock market. Norway’s GPFG participated in the initial public offerings of electric car startup NIO Inc., Meituan Dianping, and China Tower Corporation Ltd. Listed China stocks make up only 3.7% of Norway GPFG’s total portfolio. Other sovereign funds like GIC Private Limited, Temasek Holdings and some Gulf funds have taken larger stakes in Chinese companies before going public.

Chinese Investors Pump Money into Chinese ETFs

Chinese investors, breaking a previous record, put ¥42.5 billion (US$ 6.2 billion) to work in a combined 145 exchange-traded funds (ETFs) that track Chinese stocks. Chinese ETFs saw 22.8 billion shares purchased in October. Two of the funds alone, the China Asset Management Shanghai Stock Exchange 50, and Huatai Securities Bairui CSI 300, pulled in ¥18 billion. State-owned China Securities Finance, and Central Huijin Investment, a division of China’s sovereign wealth fund, funneled cash into the Shanghai Stock Exchange 50, China Security Index 300, China Security Index 100, and a number of additional ETFs. These and other organizations are pushing money into the market, in part, to allay fears about market weakness. It is hoped that the moves will boost public confidence in the economy.

Furthermore, index provider MSCI plans to announce its decision on or before February 28, 2019, on whether to alter weighting of China’s A-shares in its index.

Chinese Government Continues to Provide Support Levels to Local Markets

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Cryptocurrencies Creep into the Middle East

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Banking behemoth J.P. Morgan Chase disclosed its own digital currency called JPM Coin. The digital token will be used to settle payments between clients. JPM Coin will be backed by physical U.S. dollars and be based off Quorum. Quorum is J.P. Morgan’s private Ethereum-based chain. JPM Coin plans to compete with Ripple, which created XRP, another digital currency that is used for settlements. Ripple’s main target market is cross-border payments and remittances.

The Central Bank of the United Arab Emirates and the Saudi Arabian Monetary Authority have unveiled their plans for Aber, an interbank digital currency. Both banks have indicated that Aber will be limited to financial settlements using distributed ledger technologies. It will be rolled out on a probational basis, and used by select banks within the two countries. A date for rollout has not yet been declared. A joint statement hinted at a broader application of the currency in the days ahead. If “no technical obstacles are encountered, economic and legal requirements for future uses will be considered.”‏ Blockchains and Distributed Ledgers technologies will be employed. The plan is for ‘Proof-of-Concept’ testing, which involves studying and fully comprehending the ways modern technologies can achieve practical applications. The digital currency has the potential to become a reserve system for central payments.

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CPPIB Inks Partnership Vehicle with La Française and its Shareholder CMNE

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La Française and Canada Pension Plan Investment Board (CPPIB) formed a strategic partnership for the launch of a real estate investment and development vehicle: Société Foncière et Immobilière du Grand Paris. The joint venture between CPPIB (80%) and Caisse Fédérale du Crédit Mutuel Nord Europe (CMNE) (20%), La Française’s shareholder, will invest in major real estate projects linked to the Grand Paris infrastructure in the Greater Paris area. The parties will initially allocate €387.5 million in equity to the venture. The partnership will target regeneration and infrastructure-led investments.[ Content protected for Sovereign Wealth Fund Institute Standard subscribers only. Please subscribe to view content. ]

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Norges Bank Governor Voices Opinion on Relaxing SWF Withdrawals over Specific Uses

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Øystein Olsen, the Governor of Norges Bank, which oversees the Norway Government Pension Fund Global (GPFG), voiced his opinion on the Norwegian government’s plans to alter the rules that regulates the country’s SWF withdrawal rules in certain circumstances. The coalition government led by Norwegian Prime Minister Erna Solberg wants to relax the limits on SWF withdrawals in specific cases. Norway’s government seeks to raid the fund to pay for the replacement of four major state buildings impacted by a terrorist attack and a crashed Royal Norwegian Navy frigate (KNM Helge Ingstad).

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