Strong dollar, weak oil prices will complicate global investment, says CIC chief
Sovereign wealth fund chairman sees potential difficulties in a strong US dollar, weak oil prices
A strong US dollar, weak oil prices and capital flowing back to the United States will make it more difficult to invest internationally this year, says sovereign wealth fund China Investment Corp (CIC).
"Large international institutions need to be more careful when making investments this year," CIC chairman and chief executive Ding Xuedong told the Asian Financial Forum in Hong Kong yesterday.
Ding said that if the US dollar stayed strong, it would mean depreciation for many other currencies against the dollar, leading to investment risks. A strong dollar might also lead to more capital flowing back to the US, while low oil prices would harm the oil-exporting countries, making the investment environment even more complicated.
"Not all capital would flow back to the US. Some regions could still attract investments, including China and India," said Ding.
CIC had total assets of US$652.7 billion as of the end of 2013. Some 40 per cent of its portfolio was invested in open-market equity, according to its annual report. Of that, 46 per cent was invested in the US.
"The US has been the strongest among developed countries in terms of economic performance," Ding said, "This year its economic growth might be higher than 3 per cent."
He said the US economy had benefited from the plunge in oil prices, which has lowered production costs. However, a sustained decline in oil prices would be bad for the US.
"A short-term decline in oil prices would benefit the US, but not if the decline persists. If crude continues below US$60 or US$50 a barrel, the US would have to stop producing shale gas. That wouldn't be a good thing for the US in the long run."
Ding also criticised the US' limited foreign investments in infrastructure, adding that differences between the Republicans and the Democrats on infrastructure investment might cause uncertainty to the US economy.
