China’s gradual market liberalization may be good news for Canadian pensioners.
Canada Pension Plan Investment Board (CPPIB), the country’s largest pension fund, currently has 4 percent of its portfolio in the mainland — a figure that president and CEO Mark Machin said is too low for a globally diversified portfolio such as his.
But he plans to increase that share as the world’s second-largest economy opens itself up.
“We want to significantly increase our investment here over the long term,” he said, explaining that his fund is “substantially” underweight relative to GDP, but not necessarily relative to available market cap.
Last month, the People’s Bank of China allowed foreign investors to hedge bond positions in the foreign exchange derivatives market — a move that many strategists deemed significant to overall market reform.
“China is now by many measures the third-biggest bond market in the world at around $7 trillion, so allowing that to be more accessible to capital is yet another aspect of making this a more investable place,” Machin told CNBC at the China Development Forum in Beijing.
“We’re value investors and we’re super long term. We like to say a quarter for us is 25 years, not three months,” Machin said. “We don’t necessarily need our money back for immediate use, so I think we’re seen as relatively friendly capital, and therefore our access is reasonably good here.”