China’s sovereign wealth fund bought a stake in the London-traded unit of Kazakhstan’s state-run energy company, taking its spending on resources to at least $3.69 billion this month.

China Investment Corp., which holds almost $300 billion, bought an 11
percent stake in Astana, Kazakhstan-based JSC KazMunaiGas Exploration
Production for about $939 million by purchasing global depositary
receipts, according to a statement dated today on the Beijing-based
fund’s Web site.

China is hunting for resources from Canada to Nigeria to support
expansion in the world’s fastest-growing major economy. Today’s deal
follows a combined $2.75 billion spent by the fund on Indonesia’s PT
Bumi Resources and Noble Group Ltd. last week.

“The reason why China is investing in assets like this is simple: it
needs more oil and gas,” said Shi Yan, an analyst at UOB-Kay Hian Ltd.
in Shanghai. “China also has huge financial reserves and with commodity
prices still down from highs last year, it’s still a good time to buy.”

KazMunaiGas Exploration’s GDRs rose as much as 4.5 percent to $21 as of 8:47 a.m. in London.

CIC bought $1.9 billion of debt from Jakarta-based Bumi Resources,
Indonesia’s biggest coal producer, last week, and paid $850 million for
a 15 percent stake in Noble, a Hong Kong-based commodity supplier, on
Sept. 22. Vancouver-based Teck Resources Ltd., Canada’s largest
diversified mining company, sold a 17 percent stake to CIC in July.

China, the world’s biggest buyer of commodities including soybeans,
cotton and iron ore, will expand 8.2 percent this year, compared with a
March forecast of 7 percent, the Asian Development Bank said this
month.

Global Reach

China has turned to countries including Canada, Singapore, Iraq and
Kazakhstan this year in its hunt for resources. China Petrochemical
Corp.’s purchase of Swiss-based Addax Petroleum Corp. for $7.2 billion
in June added oil reserves in the Kurdish area of Iraq, Gabon and
Nigeria.

PetroChina Co., the country’s biggest listed oil company, agreed in
April to pay up to $1.4 billion for half of a gas joint venture in
Kazakhstan. PetroChina is buying 50 percent of the venture and
state-owned KazMunayGaz National Co. will own the remainder.

Banks to Resources

“China is targeting particular areas of the world like Central Asia and
Africa to secure energy resources,” said Michael Yu, an energy analyst
at China Merchants Securities in Hong Kong. “China has good relations
with developing countries like Nigeria and Angola and this helps secure
deals. It’s far more difficult for China to secure resources in
developed countries like the U.S. where there may be more political
opposition.”

PetroChina’s refinery in Dalian started processing high- sulfur Sudan
crude oil for the first time in April. China National Offshore Oil
Corp. is among companies in talks to acquire 16 production licenses in
Nigeria, the west African country’s president’s office said yesterday.

The Chinese wealth fund is increasing investments in commodities after
losing money on financial firms including Blackstone Group LP and
Morgan Stanley. CIC Executive Vice President Jesse Wang said in March
the fund may invest in “undervalued” commodity assets.

CIC is not the only wealth fund looking at commodities after getting
stung by financial investments. Temasek Holdings Pte, Singapore’s $122
billion state investment company, in June agreed to buy a stake in Olam
International Ltd., a Singapore-based agricultural commodities
supplier.

Temasek reported net income fell a record 66 percent in the 12 months
to March 31 as a collapse in credit markets drove down the value of its
stakes in Bank of America Corp. and Barclays Plc, which it sold at a
loss.

CIC said in August it posted a negative 2.1 percent return on its global investment portfolio last year.

The purchase of KazMunaiGas Exploration GDRs was made through CIC’s
investment arm, Fullbloom Investment Corp., and started on July 14, it
said. The Kazakh investment is in accordance with the fund’s long-term
strategy, a CIC spokeswoman said.

Source: Bloomberg

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