Tuesday, July 21, 2009

China's Wen orders to Buy commodities: China to deploy forex reserves TNR.v, CZX.v, RMK.v, SGC.v, CGH.to, ASM.v, BTT.v, GBN.v, AMM.to, EPZ.v




After raising concern about health of US Dollar and our recent US Dollar collapse alert, Chinese premier Mr Wen issues the order to Buy commodities and secure natural resources in order to diversify from paper currencies. US Dollar future from now on is solidly on the next leg down and call from Canaccord Adams seems to be very timely to repeat it again:




"From an investor’s perspective, the goal is to own what China needs and China needs metals. And strategically, it could be easier for China’s state-owned corporations to fly under the radar and buy or take positions in smaller foreign corporations rather than their larger cousins. We return to our long-term thesis: own quality junior exploration and mining companies with superior projects. Canaccord Adams"






We have been advocating this idea to build positions in Junior mining for a while and now we new confirmation to potential of recent M&A activities in companies we monitor.










"Companies (Chinese - S.) are allowed from 1st of August basically to shop around the world for necessary resources in exchange for US Dollars effectively which are overflowing the monetary system."







After recent strategic investment in
TNR Gold TNR.v Canada Zinc Metals is busy on developing its status as regional play:







"
Strategy looks like Investment expansion:Tongling - Canada Zinc Metals - District play with TEC and Korea Zinc - Lundin Mining on board - Zinc and Lead - Cars - Growth space: China largest auto market from March - New Bull - Electric cars - Lithium and REE - TNR Gold and International Lithium Corp."







"
Canada Zinc Metals's Akie holds 23.6 million tons of high grade Zinc, nearby J/V between TEC and Korea Zinc holds another 50 million tons. District play can mean 100 million tons with further discoveries and deals among these three players and now CZX.v has a strong backing strategic partner with deep pockets."














By Jamil Anderlini in Beijing
Beijing will use its foreign exchange reserves, the largest in the world, to support and accelerate overseas expansion and acquisitions by Chinese companies, Wen Jiabao, the country’s premier, said in comments published on Tuesday.
“We should hasten the implementation of our ‘going out’ strategy and combine the utilisation of foreign exchange reserves with the ‘going out’ of our enterprises,” he told Chinese diplomats late on Monday.
Mr Wen said Beijing also wanted Chinese companies to increase its share of global exports.
The “going out” strategy is a slogan for encouraging investment and acquisitions abroad, particularly by big state-owned industrial groups such as PetroChina, Chinalco, China Telecom and Bank of China.
Qu Hongbin, chief China economist at HSBC, said: “This is the first time we have heard an official articulation of this policy ... to directly support corporations to buy offshore assets.”
China’s outbound non-financial direct investment rose to $40.7bn last year from just $143m in 2002.
Mr Wen did not elaborate on how much of the $2,132bn of reserves would be channelled to Chinese enterprises but Mr Qu said this was part of a strategy to reduce its reliance on the US dollar as a reserve currency.
“This is reserve diversification in a broader sense. Instead of accumulating foreign exchange reserves and short-term financial assets, the government wants the nation to accumulate more long-term corporate real assets.”
State-owned groups, particularly in the oil and natural resources sectors, have stepped up their hunt for overseas companies and assets on sale because of the global crisis.
China Investment Corp, the $200bn sovereign wealth fund, has been buying stakes in overseas resources companies and has taken a 1.1 per cent stake in Diageo, the British distiller.
In an interview published in state-controlled media, the chairman of China Development Bank said Chinese outbound investment would accelerate but should focus on resource-rich developing economies.
“Everyone is saying we should go to the western markets to scoop up [underpriced assets],” said Chen Yuan. “I think we should not go to America’s Wall Street, but should look more to places with natural and energy resources.”
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