Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

Continue Reading

Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

Continue Reading

Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

Continue Reading

Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

Continue Reading

Financial

Hard-hit online lender CAN Capital makes executive changes

The biggest online lender to small businesses in the US has pulled down the shutters and put its top managers on a leave of absence, in the latest blow to an industry grappling with mounting fears over credit quality. Atlanta-based CAN Capital said on Tuesday that it had replaced a trio of senior executives, after […]

Continue Reading

Categorized | Equities

Norway oil fund hit by volatile EM stocks


Posted on October 28, 2015

Yngve Slyngstad, chief executive officer of Norges Bank Investment Fund, stands on stage during a news conference in Oslo, Norway©Bloomberg

Norway’s oil fund revealed on Wednesday the extent of the impact of the market turmoil during the third quarter amid losses from Volkswagen and Chinese stocks.

Norges Bank Investment Management reported a 4.9 per cent loss for the period, while its chief executive warned that inflows from the government could dry up in the fourth quarter.

    The oil fund, one of the biggest equity managers in the world, was hit hard by the shakeout in Chinese stocks in the three months to the end of September, losing NKr273bn ($32.3bn), its third worst fall to date in krone terms.

    Its worst-performing investments in the quarter were VW — it lost NKr4.9bn following the carmaker’s emissions scandal — Glencore and Daimler.

    The value of its equity investments, which made up 59.7 per cent of the fund at the end of the quarter, fell 8.6 per cent in the period. Bond investments fared better, gaining 0.9 per cent.

    NBIM holdings in property, to which it is extending its exposure, returned 3 per cent. They made up 3 per cent of the fund by the end of the quarter, against its ambitions for 5 per cent.

    The fund had a market value of NKr7.019tn on September 30. The extent of the pressure it faced was offset by a weakening krone, which helped boost the fund’s value by NKr382bn after foreign denominations were translated.

    “We’ve had a reset of investors’ expectations of global growth during the course of this year,” Yngve Slyngstad, NBIM chief executive, told the Financial Times.

    “Although the macroeconomists almost every year . . . have revised downwards their initial expectations, this time it seems like the market has followed that quite directly.

    “The importance of China is of course obvious. It’s clear that it affects directly a lot of sectors we invest in.”

    Norway’s national income tracks the decline in crude oil prices, so the fund faced the prospect of capital outflows back to the government.

    Inflows in the third quarter were NKr12bn, making NKr29bn for the year so far. Typical annual inflows in the past have been closer to NKr240bn

    “It is quite likely that you will see a fourth quarter without inflows,” Mr Slyngstad said.

    “But it’s still a situation we are comfortable with . . . There isn’t any practical issue from the management of the fund with regards to a lower inflow.”

    Although the macroeconomists almost every year . . . have revised downwards their initial expectations, this time it seems like the market has followed that quite directly

    – Yngve Slyngstad, NBIM chief executive

    Andrew Parry, head of equities at Hermes Investment Management, said: “On first sight, this does seem to be quite a large negative return and could well reflect their deeper exposure to domestic markets, which are more sensitive to the oil price.

    “But one disappointing quarter doesn’t really mean anything for long-term investors unless you are going to panic and sell at depressed levels. The fund does not make that mistake — its strong governance structure stops them panicking.”

    The fund has come under pressure to divest from fossil fuel stocks. In anticipation of restrictions on its investments, it continues to sell out of coal miners and is talking to conglomerates about hiving off their coal interests.

    NBIM is already excluded from buying tobacco companies and many defence companies.