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China Investment Corporation (CIC), has announced  that it has closed the first phase settlement for the purchase of a 45% stake in Nobel Oil Group.

CIC is the nation’s sovereign wealth fund & was founded in 2007, with an original asset base of $200Bn funded by China’s forex reserves. It has since then been cheery picking assets, most notably swooping in on US financial firms Morgan Stanley & Blackstone earlier this year. Nobel Group is a Russian based oil exploration & services firm which operates extensive assets in Azerbaijan, mostly in the Baku region.

The $300 million  investment is scheduled to be completed in two phases. In the first phase, which was completed by the end of September, CIC invested $100 million  for holdings in the Russian oil company’s stake & made available a further $50 million for short term operating expenses.

CIC states that the remaining $150 million draft will be paid over across a nine month period, this second tranche will be used to acquire & develop oil assets near Nobel’s existing oilfields,  amounting to 150 million barrels of oil equivalent (BOE) over & above it’s 45% stake.

In what is a continuing trend with Chinese state entities hunting the globe for strategic investments (see Scramble for Africa), this is CIC’ third move in a month to acquire stakes in foreign commodities based companies. Late September saw  CIC  handing over $939 million for a stake in the Kazakhstan company KazMunaiGas, in October it invested $500 million in SouthGobi, a Canadian based coal mining & exploration company with assets in Mongolia.

Analysts are looking at China’s latest efforts with great interest, with many asserting that China & CIC in particular is looking for additional ways to mitigate risk in it’s huge foreign exchange reserves & is effectively a hedge against further expoected  devaluation of the US dollar. Another potential upside is that CIC may garner additional profits, as a fall in the dollar when accompanied by a recovery in the global economy will lead to commodity prices rising sharply.

This is a recurring theme that has been widely commented upon. Our take, is that this is a continuation of central government policy within the PRC. So far this year we have witnessed some significant changes in China’s economic stance.  From gold reserves, Australian / African metal & mineral companies, LatAm / African oil deals & bilateral trade agreements, China is in our opinion sending a pretty strong signal to the US & the rest of the world in general.