The world’s biggest sovereign wealth fund isn’t about to lose its faith in China.
The $870 billion fund, built on Norway’s oil riches, says the current selloff and policy shifts from China’s leadership won’t change its long-term view on the world’s second-biggest economy, where it’s prepared to increase its investment.
“We’re following the movements there and we see that they are steadily opening and taking steps in the direction of opening up the markets,” Ole-Christian Bech-Moen, chief investment officer of allocation strategies, said on Tuesday in an interview during a conference in Oslo. “We’re thinking long-term, so the short-term policies there and policy shifts -- it’s not that important for the longer-term strategic thinking.”
After years of lobbying, the Norwegian wealth fund this year had its quota for investments in Chinese A shares lifted to $2.5 billion from $1.5 billion. It had about $27 billion invested in China and Hong Kong at the end of last year.
If China’s market becomes even more liberalized, “we know that it will be a big allocation” for the fund, Bech-Moen said.
The People’s Bank of China’s surprise decision last week to allow markets greater sway in setting the currency’s level triggered the biggest selloff in 21 years and roiled global markets. Since then, 10 emerging market nations have said they are particularly at risk since China’s yuan devaluation.
Norway’s wealth fund held 9.6 percent of its stocks and 12.9 percent of its bonds in emerging markets at the end of March. It has been increasing its investments in those markets as it tries to escape dwindling returns in the developed world.
“Capturing broader aspects of global growth is something where we have a very long horizon, so it’s not really governed by short-term fluctuations,” Bech-Moen said.
Chinese officials have a tough job in confronting the economic slowdown and undertaking market reform, former U.S. Treasury Secretary Henry Paulson said at a conference in Oslo hosted by Norway’s oil fund.
President Xi Jinping “understands the importance of fixing the economy,” Paulson said. “He has unleashed a massive reform agenda that goes way beyond the economy. It goes to every part of China -- economic, social and political.”