LONDON: Sovereign wealth funds from oil-producing countries mainly in the Middle East and Africa are on course to dump up to US$225 billion in equities, a senior banker estimates, as plummeting oil prices and the coronavirus pandemic hit state finances.
Around US$100-US$150 billion in stocks have likely been offloaded by oil-producer sovereign wealth funds, excluding Norway’s fund, in recent weeks, Panigirtzoglou said, and a further US$50-US$75 billion will likely be sold in the coming months. In addition to the cash reserves, additional liquidity was typically drawn firstly from short-term money market instruments like treasury bills and then from passively invested equity as a last resort, the source said.“Our investor flows broadly show more resilience than market pricing would suggest,” said Elliot Hentov, head of policy research at State Street Global Advisors. “There has been a shift toward cash since the crisis started, but it’s not a panic move but rather gradual.
Slyngstad also said that any fiscal spending by the government this year would be financed by selling bonds in its portfolio.State-backed, energy-rich funds account for a significant chunk of the roughly $8.40 trillion in total sovereign wealth assets, funds they’ve built up as a bulwark for when oil revenues dry up.
Around US$216 billion of that fall would be from stock market losses and a further $80 billion from drawdowns taken by cash-squeezed governments.
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