Main reference: Story in Dongfang Daily
THERE ARE OVER one trillion yuan in assets under management in China's 12-year old National Social Security Fund.
So where the investment funds end up is basically of interest to all investors.
NSSF Chairman Dai Xianglong says the PRC bourse has hit bottom.
Is the NSSF ready to jump in head first and will other investors take the bait?
He said he believes the nadir is here, and that next year “will be better” for China’s beleaguered A-share markets in Shanghai and Shenzhen.
Speaking to media earlier this week, Mr. Dai said that as the local capital markets have been murky at best for most of this year, investor sentiment has been struggling to get excited about A-shares.
However, he predicted that next year would produce even better investment returns for the NSSF, which should realize an aggregate ROI of around 5% this year.
Mr. Dai is a former governor of the People's Bank of China – the country’s central bank -- and a former mayor of Tianjin.
Founded in 2000, the NSSF had total assets under management of over 700 billion yuan in 2010.
Among different asset categories, fixed income took up 40.7%, domestic stocks 25.9%, global stocks 6.5%, equity assets 20.5% and cash equivalents 6.3%.
The 5% returns that Mr. Dai is forecasting for the NSSF’s investments this year is much higher than the ROI achieved in 2011 – just 0.84%.
It would also represent the best year since 2010, if realized.
As of end-year 2011, the NSSF has indeed been a very good bet for the 11-year span, offering average annual returns of 8.4% -- a full six percentage points higher than the corresponding inflation growth over the same period.
Mr. Dai pointed out that as of September of this year, total assets under management for the NSSF had already surpassed 1.04 trillion yuan, with 830 billion set aside as strategic reserve funds.
This total AUM figure represents a whopping 48.6% increase from the 2010 total.
He added that given the “graying” of Mainland China’s population and the anticipated longer life expectancies, it was quite possible that the NSSF would grow in both importance and AUM size.
As such a massive presence in the domestic share markets, investors would do well to keep a close eye on the announced and assumed strategies of the NSSF.
Currently down nearly 20% from year-earlier levels, the benchmark Shanghai Composite Index has been ever so patiently waiting for a sustained climb back to positive territory for several months.
If Mr. Dai is correct that “the bottom is here,” then investors should pay close attention to whether or not – and when -- the NSSF puts its money where its mouth is.
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