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Markets News Wednesday: Norway’s sovereign wealth fund has topped NKr3,000bn - - $518bn - - for the first time; Oil producer made first transfer to fund in 1996
By Finfacts Team
Oct 20, 2010 - 9:10:52 AM
Norway’s sovereign wealth fund has topped NKr3,000bn ($518bn) for the
first time, marking a milestone for the the country of 4.8m people.
The oil producer set up the fund in 1996 when it got its first capital
transfer from the Ministry of Finance. It aims to preserve Norway's oil
wealth for future generations and today it owns about 1% of all global stocks
and counts as the world’s second biggest sovereign wealth fund after Abu
The fund’s investments consisted of 59.6% equities and 40.4% fixed-income
securities at the end of the quarter. The market value of equity investments
fell NKr66bn kroner to NKr1,664bn in the quarter, while fixed-income investments
rose NKr95bn to NKr1,128bn.
The market value is largely determined by inflows of capital, returns and
fluctuations in the krone exchange rate. The fund had NKr2,379bn in capital
inflow and NKr430bn in returns between May 1996 and 30 June 2010, while changes
in the krone exchange rate reduced the market value by NKr3bn.
“A surge in oil prices since 2002 increased the size of capital inflows,
which reached a record NKr384 billion kroner in 2008 before dropping in 2009 and
2010,” said Yngve Slyngstad, chief executive officer of Norges Bank
Investment Management (NBIM), which manages the fund. “Increased equity
investments, particularly in emerging markets, also helped the fund’s growth.”
The fund boosted its share of equity investments to 60% from 40% between the
summers of 2007 and 2009, reducing fixed-income investments to 40%. It got a
mandate on March 01 this year to invest as much as 5% of its assets in real
estate through a corresponding decrease in fixed-income investments.
Yahoo!: Yahoo! reported on Tuesday that quarterly
earnings more than doubled but revenue growth was flat
compared with Google's revenue rise of 23% in the third
quarter, which was reported last week.
Yahoo! said third-quarter net profit more than
doubled, to $396m or 29 cents a share, from $18m or 13 cents
a share, in the year-ago quarter. Much of the increase, 13
cents a share, related to a one-time gain from the sale of
its HotJobs business.
Revenue was $1.12bn after accounting for the money the
firm pays to affiliates.
By the time China concludes the implementation of its tightening measures, James Chirnside, CIO at Asia Pacific Asset Management, says growth in the mainland could fall to 6-8%. He speaks to CNBC's Oriel Morrison, Bernard Lo & Adam Bakhtiar:
Fed considers exotic policy tools as dollar downside mounts:
Davy economist, Aidan Corcoran, comments -- "Federal
Reserve Bank of Chicago president Charles Evans yesterday (October
19th) outlined his plan to return the US to normal inflation levels.
Evans favours price level targeting instead of inflation targeting
as a temporary measure to stimulate the economy. The potential
effects of such a policy may be too little understood for the Fed to
implement, but Evans's speech does suggest that QE2 may have an
The key attraction of price level targeting is that it comes
with a hard-wired exit strategy: a specific level of prices. But
prices are imperfectly measured, making it difficult to time the end
of intervention. Moving consumer prices through asset purchases
would also require 'much more' monetary accommodation than has been
done so far, according to Evans. High savings rates mean that
expansion of the broad money supply, if it occurs, may have a
limited impact on the real economy.
Further monetary stimulus in the US will continue to weigh on
the value of the dollar just as China signalled yesterday that it
may be entering a tightening phase. The People’s Bank of China
announced an increase in the one-year lending rate to 5.56% from
5.31%, effective today. The higher rate, particularly if it is the
start of a hiking cycle, will attract foreign capital, adding
further pressure on the dollar."
Why the possible risks associated with QE2 are "acceptable," with Dennis Lockhart, Atlanta Fed President:
Economic View: Age of austerity; Goodbody chief economist, Dermot
O’Leary, comments -- "As if we didn’t know already, numerous events
around Europe further underlines the fact that we are in the age of austerity.
The biggest of these is the announcement of the UK’s spending review, due for
release at 12.30pm this afternoon.
Recognising the scale of the UK’s fiscal problems, the plan will announce
that up to half a million public sector workers will be cut over the next five
years, with deep spending cuts in most, but not all, departments. As we
mentioned earlier in the week, the emergence of a new government provided the
platform for these tough choices to be made and they will only get one shot at
this. As can be seen in the strikes in France, it may not be easy to get public
support for some of the measures that will be announced. While the bond market
has not been exerting undue pressure on the UK, and to a lesser extent, France,
to sort its public finances, market discipline has certainly been at work in
Europe’s peripheral economies.
Higher bond yields have reminded countries like Ireland, Spain and
Portugal that the market needs certainty that all efforts will be made to tackle
the problems. This is not just about economics though; politics is very
important too, as illustrated by the fact that: (1) Portugal is scrambling for
support from its biggest opposition party, who will make a decision by the end
of the month; (2) Spain looks to have just about got the support it needs for
passing its Budget by coercing politicians from the Canary Islands to back it,
and; (3) the leaders of Ireland’s political parties will sit down later today in
an attempt to find some common ground on the four-year plan for the public
finances. As we said yesterday, this is a big leap from the position a little
over a week ago. For a while, Ireland was on its own in its efforts to tackle
its public finances. That is certainly not the case now."
In New York Tuesday,
the Dow Jones fell 165 points or 1.48% to 10,979.
The S&P 500 slid
1.59% and the Nasdaq slipped 1.76%.
Investors were spooked by China's
decision on Tuesday to raise its benchmark interest rate by 0.25% and a poor
earnings report from Bank of America.
The MSCI Asia
Pacific Index lost 1.0% Wednesday.
Nikkei 225 fell 1.65%; China's Shanghai Composite dropped 0.08%; Australia's
S&P/ASX 200 Index feel 0.66% and India's Sensex declined 0.25%.