Baku, Azerbaijan, Aug. 29
By Maksim Tsurkov - Trend:
The value of investments of the State Oil Fund of Azerbaijan (SOFAZ) in the Chinese state and agency bonds, including the accumulated accrued interest, amounted to 3.02 billion yuan, SOFAZ told Trend Aug. 29.
As a result of the national currency devaluation in the US dollars, SOFAZ's investments decreased from $500 million (3 billion yuan), invested by SOFAZ in Chinese bonds in July, to $472.7 million [taking into account the exchange rate as of Aug. 29 - 6.39 yuan to $1].
"The investments in the Chinese yuan are not speculative," SOFAZ said. "They are for long-term in accordance with SOFAZ's investment strategy, rather than short-term fluctuations on the market."
SOFAZ said that beginning from 2012, along with new types of assets, including shares and real estate, SOFAZ began to invest in assets in such currencies as Australian dollar, Turkish lira and Russian ruble to increase revenues in the long term.
"SOFAZ decided to start investing in Chinese yuan in accordance with the currency basket diversification strategy and given that China is the world's second largest economy in nominal GDP volumes and the yuan claims to be included in the list of reserve currencies," said the fund.
SOFAZ said that given the market conditions of China and the deterrent monetary policy of the People's Bank of this country, the State Oil Fund considered it appropriate to start investments in yuan with investing in the bond market.
"In order to do that, SOFAZ received the appropriate license from the People's Bank of China," the state oil fund said. "Based on the agreement signed between the two organizations in July 2015, the state oil fund invested up to 3 billion yuan in the state and agency bonds of China. To date, the value of these bonds, including the accrued interest income, amounts to 3.02 billion yuan."
The SOFAZ said that in the future the fund may consider the possibility of investing in other types of financial instruments on the Chinese market, including stocks as well.
It should be noted that the Chinese stock market on Aug.27 saw a growth after a long decline, and in the result, the Shanghai Composite index rose by 0.6 percent. On Aug.24, the index of the Shanghai Stock Exchange lost 8.5 percent, which led to the collapse of stock markets around the world - the worst one for the last eight years.
On Aug.25, China's central bank invested 150 billion yuan ($22.4 billion) into the financial system of the country, trying to improve the situation on the stock market.
SOFAZ was established in 1999 with assets of $271 million. As of July 1, 2015, SOFAZ assets decreased by 3.56 percent compared to early 2015 ($37.104 billion) and were estimated at $35.783 billion.
Based on SOFAZ's regulations, its funds may be used for the construction and reconstruction of strategically important infrastructure facilities, as well as solving important national problems.
The main goals of the State Oil Fund include: accumulation of resources and the placement of the fund's assets abroad in order to minimize the negative affect on the economy, the prevention of "Dutch disease" to some extent, promotion of resource accumulation for future generations and support of current social and economic processes in Azerbaijan.