LONDON (Reuters) – Some of the world’s largest sovereign wealth funds and public pension funds are caught in rising technology-related tensions between the United States and China, according to a Reuters analysis of their archival data and public disclosures.
These range from the sovereign wealth funds of Norway and Singapore to the Swiss central bank and the US $ 1.1 trillion TIAA, which was founded more than a century ago by Andrew Carnegie as the American Teacher Insurance and Annuity Association.
US investors are barred from owning stakes in more than 40 Chinese companies seen as having military ties in a series of moves since November as US President Donald Trump seeks to strengthen his hardline policies toward Beijing.
That prompted Nuveen’s TIAA unit to sell stakes in blacklisted companies including China Telecom, China Mobile and China Unicom, as well as microchip giant SMIC, state oil company CNOOC and cellphone and gadget maker Xiaomi.
Other US public pension funds are expected to follow.
CalPERS, the largest fund, holds Hong Kong-listed ‘H’ shares in several companies, including a 1.1% stake in China Telecom and 0.2% of China Mobile and China Unicom respectively, according to Refinitiv data. CalPERS, which has been criticized by Republican politicians for its investment in China, did not respond to a request for comment.
Florida State Administration, which manages $ 200 billion in assets and has small stakes in China Telecom, China Mobile and Xiaomi, according to Refinitiv data, told Reuters it would comply with the ban.
“Those sanctions really bite US institutions,” said Elliot Hentov, head of policy research at State Street Global Advisors.
And the ripples aren’t just felt in the United States.
A number of sovereign wealth funds (SWF) have been affected as the New York Stock Exchange and index providers MSCI, S&P Dow Jones, and FTSE Russell have removed blacklisted companies from the benchmark, causing some share prices to drop more than 20%.
Norway’s $ 1.3 trillion SWF, the world’s largest, owns a 0.2% -0.6% stake in China Telecom, China Mobile, Xiaomi, CNOOC and China Unicom Hong Kong as part of its $ 35 billion Chinese equity portfolio. more broadly, according to the most recent disclosure running through early 2020. It said it would not comment on specific holdings.
Singapore’s GIC, which is referred to as an “independent country investor”, owns 10% of Hong Kong-listed China Telecom’s ‘H’ shares and owns about 1.4% of mainland’s SMIC, A- and H-shares, Reuters calculations based on stock exchange filings shows. GIC declined to comment.
Other holders are the Canadian pension fund Caisse de Depot et Placement du Quebec (CDPQ), British Columbia Investment Management, CPP Investment Board, PGGM Vermogensbeheer, an independent pension fund based in the Netherlands and APG Asset Management.
Non-US investors are not legally obliged to make any changes and many will see the value of their Chinese investment soar in recent years.
China’s equity market is at a 13-year high and the market capitalization of a major technology index has doubled from two years ago.
“We view our investment in China – an important country in the global economy – with a long-term perspective,” CDPQ told Reuters, declining to comment on specific investments.
Graph: Increased Chinese equity investment from the Norwegian sovereign wealth fund –
While China’s increasing weight in global markets is driving state funds to hold onto a larger Chinese portfolio, recent cyber espionage bans and claims of 5G company Huawei and the social media dance craze app TikTok show how technology is now a major geopolitical battleground. .
With no indication of a new approach by US President Joe Biden, China Telecom, China Mobile, Xiaomi and CNOOC shares have fallen between 12% and 22% since being blacklisted in November or this month.
SMIC has bucked the trend with double digit gains.
“Some of the shares that are being released may be taken from owners of bargain-hunting assets outside the US,” said Winston Ma, a former managing director of the sovereign wealth fund China Investment Corp. “However, it may be difficult for them to absorb all of them.”
Graph: Gains mixed for Chinese companies amid blacklist uncertainty –
It wasn’t just Washington’s actions that caused trouble.
Beijing shocked markets in November when it suspended Ant Group’s $ 37 billion IPO plan by a few days and just as the Trump administration pushed through with its ban.
Alibaba, which owns a third of Ant, saw its market value shrink by more than a quarter. These are the top 10 global stocks and are widely held by government funds and pension funds.
US Stock Exchange Commission data sec.report/CIK/0001582202 suggests the Swiss central bank has doubled Alibaba’s stake in the past two years to $ 1.4 billion from the company’s $ 650 billion stake in September.
The November fall will remove about $ 350 million from that holdings. Alibaba shares recovered nearly half of their January losses after escaping a US blacklist.
Graph: Ownership of China Mobile by sovereign wealth funds, pension funds –
Graph: Ownership of Xiaomi Corp by sovereign wealth funds, pension funds –
Graph: Ownership of China Telecom Corp by sovereign wealth funds, pension funds –
Additional reporting by Terje Solsvik in Oslo, Brenda Goh in Shanghai, Anshuman Daga in Singapore, Maiya Keidan in Toronto and John Revill in Zurich; Edited by Catherine Evans