Don't Follow Japan! China Pension Plans $300 B Stock Buy

Bloomberg: China Pension Readies $300 Billion Warchest for Market Foray

The country’s local retirement savings managers, which have about 2 trillion yuan ($300 billion) for investment, are handing over some of their cash to the National Council for Social Security Fund, which will oversee their investments in securities including equities. The organization will start deploying the cash in the second half, according to China International Capital Corp. and CIMB Securities.

Chinese policy makers announced the change last year in a bid to boost yields for a pension system that has long suffered low returns by limiting its investments to deposits and government bonds. For the nation’s equity markets -- which are dominated by retail investors and among the world’s worst performers this year -- the state fund’s presence is even more valuable than its cash, said Hao Hong, chief China strategist at Bocom International Holdings Co.

The NCSSF has "such a good reputation in being a value investor that if they take the lead, the signaling effect is actually quite strong," said Hong, who had predicted the start and peak of China’s equity boom last year. "It’s almost like Warren Buffett saying he is buying a stock."

A Chinese article posted at iFeng says: Don't follow Japan! They lost $100 billion in pension funds.

iFeng: 别学日本！养老金入市炒股亏了近1000亿美元

ZH: After Losing $100 Billion On Terrible Stock Investments, The World's Largest Pension Fund Is Doubling Down

So with Abenomics careening off the cliff and headed for a traumatic death, and with Kuroda having become the laughing stock of central bank circles, has Japan finally learned its lesson? Will the GPIF rotate out of money-losing stocks and back into bonds which are currently trading at record high prices? According to Morgan Stanley, the answer is not a chance, for the simple reason that as a result of an upcoming asset rebalancing, the GPIF will have no choice but to buy even more money-losing stocks.

As Bloomberg reports, because shares held by Japan’s $1.4 trillion Government Pension Investment Fund have suffered such large losses, it will need to add to those holdings to meet targets for their weighting, while selling sovereign bonds whose value has soared. Assuming no re-weighting was done since Jan. 1, GPIF will need to buy 4.2 trillion yen ($41 billion) of local stocks and sell 9.8 trillion yen of Japanese government bonds to reach its goals. The brokerage didn’t give a time frame for this buying.

I don't know that this will be a money loser long-term. Depends on how long they can wait for the end of the yen.