Tuesday, February 9, 2010

China Buys Oil (USO that is)

China Becomes Oil ETF’s No. 4 Holder, Buys SPDR Gold Trust
By Christian Schmollinger and Kyoungwha Kim
Feb. 9 (Bloomberg) -- China Investment Corp., the nation’s sovereign wealth fund, joined Goldman Sachs Group and Morgan Stanley & Co. in investing in the U.S. Oil Fund, an exchange- traded crude-futures fund.
China Investment became the fourth-largest holder in the Oil Fund by buying 2 million shares, equal to 3.48 percent of the outstanding units, with a value of $78.6 million, according to a Securities and Exchange Commission 13-F filing posted on Feb. 5. It also took a 1.45 million share stake, or 0.4 percent of the total, in the SPDR Gold Trust worth $155.6 million.
Chinese miners and oil companies have bought up zinc mines in Australia, oil reserves in Nigeria, and gold deposits in the Philippines to feed the country’s demand for raw materials to fuel its economic growth. The $300 billion sovereign wealth fund pumped about $10 billion into commodity-related concerns in the second half of 2009.
“It looks like they are aware of their market power in commodity markets and want to hedge against the impact their buying has on commodity prices,” said Timothy Condon, chief Asian economist with ING Groep NV in Singapore. “I think the reserves, via the CIC, will be used to hedge the risk of a cutoff of key raw material supplies by buying stakes in commodity producers.”

So the stake is equivalent to a supertanker cargo, whats the deal? Goldman and Morgan too? This can't have been much much fun as an outright, esp with the roll eating away at it. It might be interesting as one leg of a spread structure, but why pay USO to do that for you?
 
 The charts are fun. The above chart is a 2 year chart, below a 5 day.

 



 

  

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