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PBOC buys 1.1% HDFC shares on behalf of Chinese sovereign wealth fund, Saudi picks 0.7% stake: Deepak Parekh

Saudi Arabian Monetary Authority (SAMA) too have picked up 0.7 percent in HDFC on behalf of Saudi sovereign wealth fund, Parekh said. SAMA’s name isn’t reflecting in the names of major shareholders since the holding is less than one percent of the company.

April 13, 2020 / 07:14 AM IST
Deepak Parekh, Chairman, HDFC

Deepak Parekh, Chairman, HDFC

 
 
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China's central bank, People's Bank of China (PBOC), has bought a 1.1 percent stake in housing finance major HDFC Ltd on behalf of the Chinese sovereign wealth fund SAFE. The transaction is not for the Chinese Central bank itself, said HDFC Chairman, Deepak Parekh, in an exclusive interaction with Moneycontrol.

“There is no issue here. They (PBOC) have been buying stake since the last two years,” said Parekh. “But they are buying for sovereign wealth fund. The front is the People’s Bank as they must be having the foreign exchange. Since the price came down, they bought more,” Parekh said.

Similarly, the Saudi Arabian Monetary Authority (SAMA) has also picked up a 0.7 percent stake in HDFC on behalf of Saudi sovereign wealth fund, Parekh said.  SAMA’s name isn’t reflected in the names of major shareholders as the holding in the company is less than one percent.

Moneycontrol had earlier reported that the PBOC purchased 1.75 crore shares in HDFC in the March quarter. The Chinese Central Bank now has bought 1,74,92,909 crore shares, or 1.01 percent of the shareholding, according to exchange data. The share purchase is likely to have happened between January and March.

The timing of the share purchase is significant given that HDFC shares have been sliding in recent weeks. Since the first week of February, the shares have fallen 41 percent. But, Parekh said there is no reason to worry on account of PBOC share purchase in HDFC.

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HDFC shares have fallen 32 percent from its 52-week high of Rs 2,499.65 on January 14, 2020. In this same period, India's benchmark equity index Sensex lost 25 percent while 50-share Nifty lost 26 percent.

Of late, HDFC has seen significant interest from institutional investors. For instance, the Life Insurance Corporation of India (LIC) increased its holding in HDFC Ltd to 4.67 percent from 4.21 percent in December quarter.

Earlier, HDFC's Vice Chairman and CEO Keki Mistry had informed Moneycontrol that PBOC has been an existing shareholder and had owned 0.8 percent in the company as of March 2019. The disclosure has been made now since the stake has hit the 1 percent regulatory threshold, Mistry said.

"They have been accumulating the shares over a year and are now holding 1.1 percent," Mistry said.​

Other shareholders

Like PBOC, the Saudi Arabian central bank too has been raking up stake in HDFC over the last few years. It now has a 0.7 percent stake in the company, Parekh said. Other major holders include the government of Singapore which holds a 3.23 percent stake in HDFC.

Temasek, a Singapore state-controlled investment company has investments in a range of Indian companies. Over the years, it has invested 5 percent of its global portfolio in India. Central banks and governments picking up stakes in major financial institutions across the world are common. This is part of the sovereign investment strategy and a way of diversifying their investment presence.

Why China makes news

But the news of China central bank picking up stake in a major Indian financial institution made news probably in the context of China’s aggressive bid to dominate the region. Over the years, China has attempted to dominate the trade, investment areas in Asian countries.

This has always attracted the attention of policymakers. China has significant investments in Pakistan also. According to a Financial Times report, China’s $62 billion investment under the China-Pakistan economic corridors are looked at with caution by India for its regional political implications. India fears that increased Chinese presence in Pakistan could create security problems for the country eventually.
Dinesh Unnikrishnan
first published: Apr 12, 2020 03:50 pm

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