SINGAPORE — Canada’s massive pension fund plans to invest up to a third of its funds in emerging markets over the next five years and India is an important destination, according to a senior executive.
The Canada Pension Plan Investment Board (CPPIB) manages about 434.4 billion Canadian dollars ($329.75 billion) as of June 30. A bulk of its investments are in North America — around 34% of total assets are allocated in the United States — followed by Asia.
“We expect to invest up to one third of the Fund in emerging markets by 2025 and India is a key component of that,” Suyi Kim, CPPIB’s Asia Pacific head, told CNBC by email.
“Our investments in India span different asset classes including infrastructure, real estate, public and private equities, funds and co-investments and credit,” Kim said, adding, “We see domestic consumption, technology and increasing demand for infrastructure to support the growth underpinning many of the themes and opportunities we look at in India.”
CEO Mark Machin recently told CNBC that the pension fund was reviewing its bond holdings in light of near zero interest rates.
CPPIB has an office in India. Some of its investments there include a stake in Kotak Mahindra Bank as well as $225 million to the India Resurgence Fund, which invests in distressed assets in the country.
In December, CPPIB said it agreed to invest up to $600 million in India’s National Investment and Infrastructure Fund that included a $150 million commitment in NIIF’s Master Fund and co-investment rights of up to $450 million in future opportunities.
India’s growth issues
The growth rate of South Asia’s largest economy took a hit over the last few years following important currency and tax reforms that were said to have disproportionately affected small businesses and people in the informal sector.
The coronavirus pandemic this year dashed early signs of recovery as India went into a nationwide lockdown between late-March and May as part of its efforts to slow the infection’s spread. Still, India is now the second most-affected country in the world behind the United States, with more than 5.9 million reported cases and over 94,000 deaths.
Growth for the three months from April to June fell 23.9%.
The financial sector — already in crisis for several years — faces an erosion of loan growth and higher credit costs as it prepares for a rise in bad debt from retail and corporate borrowers. Experts previously told CNBC that if the sector decides to stop lending to borrowers with low credit scores, or charge them a much higher interest on loans, it could delay India’s economic recovery.
“The ongoing credit issues in the financial services industry, which have been exacerbated by the pandemic’s impact on the economy, also present interesting investment opportunities to provide long-term, stable capital to select financial institutions and companies to finance India’s next growth cycle,” CPPIB’s Kim said.
Last week, ratings agency S&P Global said India’s banking sector, which entered the pandemic with an overhang of nonperforming assets, will see a slow recovery to pre-Covid levels that could stretch beyond 2023.
“We have taken negative rating actions on Indian banks and (non-banking financial institutions) as operating conditions have deteriorated through the crisis,” S&P Global said in a report, “Global Banking: Recovery Will Stretch To 2023 And Beyond.”
“The Indian banking sector is considered a late-exiter. Its recovery will be longer, but some ratios may return more quickly to pre-COVID-19 levels as they were weak prior to the onset of COVID-19 (in contrast with many other jurisdictions),” the ratings agency said.
CPPIB’s Kim said that beyond India, the Canadian pension fund sees investment opportunities in Greater China, South Korea, Japan and Australia.
Digital Technology Supercluster makes $10 million investment, rounding out $60 million COVID-19 program – BetaKit
The Digital Technology Supercluster has made $10.7 million in follow-on investments to five projects under its COVID-19 stream, rounding out the Supercluster’s $60 million budget for the pandemic-focused program.
Bill Tam said these latest follow-on investments are a testament to the Supercluster model.
The COVID-19 program was created at the beginning of the pandemic to invest in digital solutions that protect the Canadian economy as well as public health. The creation of the program followed a decision in March from the federal government to refocus some of the Superclusters in order to help in the fight against the pandemic.
The COVID program’s $60 million came from the Digital Technology Supercluster’s $153 million budget.
The $10.7 million in follow-on investments come as a recent report from the parliamentary budget officer found that the Superclusters were far behind on their spending goals as of March 6. The report found the federal government’s five Superclusters had dolled out just $30 million instead of the $104 million they had been projected to spend by that time.
Bill Tam, co-founder and chief operating officer of the Digital Technology Supercluster, emphasized that the reporting conducted by the parliamentary budget officer did not capture the Supercluster’s momentum since March.
Tam claimed that, since March, the Digital Technology Supercluster has already completed its entire year’s worth of investments.
According to targets the Supercluster shared with BetaKit, the Supercluster was set to have about $170 million deployed by both itself and private sector partners, into 40 to 45 projects.
As of October 21, the Supercluster and its private sector partners have invested a collective $223 million in 67 projects since the inception of the initiative, according to the Supercluster’s annual report. Tam said he expects the Supercluster will have fully invested its $153 million budget by March 2021.
“I think the grand experiment of the Supercluster model is working,” Tam said, noting that the Supercluster’s ability to double down on these collaborations presents an opportunity to change the shape of Canada’s innovation economy.
The five projects that received the cumulative $10.7 million have previously received financial support from the Supercluster under its COVID-19 program as “feasibility studies.”
“Our follow on investment thesis is really about being able to double down.”
Tam told BetaKit the feasibility studies allowed the project organizers to determine whether a technology or innovative idea is appropriate for a large-scale project with the intention of developing an application for co-investment.
“We have feasibility assessment vehicles in order for these teams to actually have a sandbox with which to collaborate on initiatives,” Tam said. “Our follow on investment thesis is really about being able to double down.”
The projects receiving follow-on funding include:
COVID Cloud: $3.18 million
Originally called Beacon, this project is developing a digital technology platform to help track how SARS-CoV-2 is evolving over time and across specific geographic regions. The project’s initial investment from the Supercluster totalled $250,000.
Lifesaver: $2.85 million
This project aims to fill COVID-19 information gaps by consolidating and harmonizing vast arrays of data. Lifesaver’s initial investment from the Supercluster totalled $250,000.
Raven2: $1.62 million
Raven2 extends the scope of the team’s original work by finding new, safe COVID-19 therapeutics that could be sold commercially in Canada and worldwide. The project’s initial investment from the Supercluster was $250,000.
Scaling Safe Food Delivery for Canadians
This project will see startup Food-X Technologies develop an e-grocery solution that aims to help retailers offer online grocery sales at scale. The project’s initial investment from the Supercluster totalled $250,000.
Screen O/S: $450,000
This project is focused on improving COVID-19 screening for the education sector and film industry after a successful two-month assessment of their on-the-spot screening technology. The project’s initial investment from the Supercluster was $87,000.
Tam said although the program’s COVID-19 budget has been fully deployed, there is still an opportunity for follow-on investment from the Supercluster’s broader $153 million budget. All projects that receive investments from the Supercluster are able to receive follow-on funding, including those not part of the COVID-19 program.
Image source Unsplash. Photo by Christina @ wocintechchat.com.
Amazon announces $100 million logistics investment in Mexico – TheChronicleHerald.ca
By Daina Beth Solomon
MEXICO CITY (Reuters) – Amazon.com Inc said on Thursday it has invested $100 million in opening new warehouses in Mexico, including its first shipping centers outside the populous capital area, in a bid to offer faster deliveries.
The new sites include two so-called fulfillment centers – one near the northern city of Monterrey and another near the central city of Guadalajara – as well as a support building in the State of Mexico, just outside Mexico City.
Amazon also opened 12 delivery stations, bringing its total to 27 across the country, it said.
“The construction of a solid infrastructure network allows the company to stay closer than ever to clients, and thanks to that, it’s possible to offer fast deliveries,” Amazon said in a statement.
Monterrey and Guadalajara are the two biggest metropolitan zones of the country after the sprawling Mexico City area.
The new facilities represent 69,000 square meters (742,710 sq ft) altogether and create 1,500 direct and indirect jobs, Amazon said.
Amazon in total now runs five fulfillment centers, two support buildings and two classification centers in Mexico, where it launched its marketplace in 2015.
Enrique Alfaro, the governor of Jalisco state that is home to Guadalajara, said the new local warehouse would help more small and medium sized businesses ship their products faster and at lower costs.
Amazon is also striving to make inroads in Brazil, where it recently opened its fifth and biggest fulfillment center in the country, with 100,000 square meters (1,076,391 sq ft).
In both countries, which are the biggest economies in Latin America, Amazon is vying with local rivals for shopper loyalty, despite its ranking as the world’s biggest online retailer.
(Reporting by Daina Beth Solomon; Editing by Amy Caren Daniel)
Citigroup Beefs Up China Expansion With Investment Bank Plan – BNN
(Bloomberg) — Citigroup Inc. is planning to include an investment banking unit in China to take advantage of an expected steady stream of big stock deals as the nation opens up and liberalizes its financial markets, a person familiar said.
In intensifying discussions in recent months, the bank’s senior executives in Asia have been lobbying the bank’s top brass in New York to revive an application as part of a plan to form a China securities business, the person said, asking not to be identified before a final decision is made.
Its local executives last year considered opting out of establishing an investment bank, balking at the costs of hiring at least 35 people as regulations require, people familiar said at the time. The U.S. bank initially planned to focus only on building its brokerage and futures trading business and expanding its custodian services.
The strategy shift, which will require more capital, comes after the introduction of a new technology board in Shanghai, as well as eased rules for selling shares to the public, which is expected to generate lucrative fees on a slew of new economy IPOs over the next few years.
The bank will now need to play catch up with rivals including JPMorgan Chase & Co. and Goldman Sachs Group Inc. who have already won approval to take control of Chinese securities operations after the country this year opened fully to foreign banks.
Citigroup has tread carefully in China amid increased political tension between the two powers as well as regulatory pressure in the U.S.
The bank has been dogged by issues of risk controls, having fines imposed on it by U.S. regulators. Some executives have expressed concerns it may not receive the blessing by the U.S. Federal Reserve for its China expansion, the person said. The lender was this month assessed a $400 million penalty by the Office of the Comptroller of the Currency, which also demanded the bank seek its approval before “significant new acquisitions” and advance approval for anything beyond “hedging, market making and securitization transactions.”
A Citigroup spokesman declined to comment.
Citigroup is one of four sponsors arranging a massive initial public offering from billionaire Jack Ma’s Ant Group, which is said to seek to raise about $35 billion with dual listings in Shanghai and Hong Kong. Share sales on the mainland have jumped 63% this year, partly driven by the emergence of the country’s new Nasdaq-style STAR board which opened last year, according to data compiled by Bloomberg.
The U.S. bank generates more than $1 billion of revenue a year from its China-based clients — a tenfold increase from a decade ago. Its locally incorporated bank currently has outlets in 12 Chinese cities and held 178 billion yuan ($27 billion) of assets by the end of last year, according to its annual report. It also operates four small lending entities in China, according to its website.
©2020 Bloomberg L.P.
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