A unit of Qatar's sovereign wealth fund has bought a 22 percent stake in CITIC Capital Holdings, linking one of the Middle East's most powerful investors with one of China's top investment funds.
While the sum Qatar is paying for the stake is likely in the tens of millions of dollars, the partnership could have a big impact globally, given the hundreds of billions of dollars in cash each fund has access to. CITIC manages $4.6 billion, but is partly owned by CIC, China's own sovereign wealth fund, which manages $482 billion.
The deal comes as Qatar has moved aggressively to put its more than $100 billion in capital to work, at a time when valuations across the globe are low, money supply tight, and traditional investors hesitant.
CITIC Capital is the country's top alternative investment firm, though it is known mainly as a private equity and real estate investor. Its private equity arm has operations in China, Japan and the United States.
CITIC's China investments include stakes in Harbin Pharmaceutical Group, Jilin Grain Group and China National Investment & Guaranty Co.
"For CITIC Capital, the transaction would help its overseas expansion, given Qatar Investment's global network. For Qatar, it would give it bigger China exposure, especially in the alternative investment space," said Howhow Zhang, head of research at fund consultancy Z-Ben Advisors.
SEEKING GREATER ACCESS
For years, Qatar has shown interest in investing into China and this deal allows it greater access. Qatar is applying for a $5 billion quota under China's Qualified Foreign Institutional Investor (QFII) scheme, the main channel for foreign investment in Chinese stock and bond markets, the official China Securities Journal reported on Monday.
Qatar's sovereign fund, known as the Qatar Investment Authority, was the top cornerstone investor in Agricultural Bank of China's $22.1 billion IPO in 2010. It still holds $2.7 billion worth of shares of Agbank, China's third-largest bank, according to Thomson Reuters data.
"Not only will Qatar Holding provide us with an enlarged capital base to fund our business expansion and investments, its significant backing will strengthen our brand positioning meaningfully as the most preferred and committed partner to invest with, both in and outside China," CITIC Capital's chief executive, Yichen Zhang, said in a statement.
CITIC Capital did not give financial details of the investment made by Qatar Holding LLC, a unit of the Qatar Investment Authority.
Asset management firms similar to CITIC Capital usually fetch around 1 percent to 2 percent of their assets under management. Even at a China premium of 3 percent, that percentage would put the deal at just under $30 million.
Chinese financial conglomerate CITIC Group is also a shareholder of CITIC Capital.
Qatar's sovereign wealth fund has traditionally preferred investing in Western markets, picking up stakes in companies ranging from car makers to banks. But it is also eyeing greater exposure to emerging markets.
Qatar Holding is the investment arm of the gas-rich Gulf state's wealth fund, with stakes in banks such as Credit Suisse and Barclays, as well as miner Xstrata and sports car maker Porsche. Last week, it bought a 20 percent stake in UK airport operator BAA for $1.4 billion.