China Investment Corp, a $200 billion sovereign wealth fund, has bought a 14.5 percent stake in trading firm Noble Group for $850 million, giving China greater exposure to global commodities and trading expertise.
The deal follows a cooperation pact between CIC and commodity trader Glencore GLEN.UL, as China pursues resource firms to give it leverage in opaque global markets and access to the raw materials needed to feed its economy.
A lot of sovereign wealth funds or state-linked firms are increasingly showing interest in resources, so this is in line with the trend, said analyst Lee Wen Ching of OCBC Securities in Singapore. Noble provides access to a diversified portfolio.
Noble, with interests from Brazilian sugar to Australian coal, is the only major global commodity trading house with a public listing, compared to privately-held but bigger rivals such as Glencore, in which sources have said CIC has concluded a cooperation agreement.
CIC's small, direct stake in Noble means the wealth fund is likely to play a hands-off role in running the business, while maintaining a role as financial investor. But the pact with Glencore will help CIC get more deeply into commodities trading, industry experts and analysts say.
Noble agreed to sell 573 million shares to CIC at S$2.1137 each, or an 8 percent discount to its last traded price.
You have Noble trading close to an all-time high. I'm sure CIC came in and said 'if you want to give us a big stake, you would need to give a discount', said Andreas Bokkenheuser, UBS analyst in Singapore, who has a buy rating on Noble.
What CIC is doing effectively is buying into the traders of commodities, and producers of commodities.
Sovereign wealth funds around the world, which oversee about $3 trillion in assets, are stepping up their investments in overseas firms after a period of redeploying funds to stabilize home markets during the financial crisis.
Singapore state investor Temasek TEM.UL recently bought stakes in commodity firm Olam and Brazil oil services firm San Antonio.
Shares in Noble, which were halted from trading last week when the group said it was in talks with an unidentified investor for a major stake, have more than doubled this year, beating the benchmark Singapore index .FTSTI, which is up by half.