The man running the world’s biggest sovereign wealth fund said there is every indication that global trade is suffering from something more serious than a temporary slowdown.
Norges Bank Investment Management chief executive officer Yngve Slyngstad said the heyday of cross-border trade is probably behind us.
“The question investors are asking themselves is if the easy wins already have been made,” Slyngstad said in an Aug. 29 interview from his office on the top floor of Norway’s central bank in Oslo. “The global supply chains have in a way had a one-time gain primarily through outsourcing of multinationals to China.”
Norway’s wealth fund owns 1.3 percent of globally listed stocks, spread out over almost 80 countries. As interest rates hit record lows, the investor has cut its long-term return expectations to about 3 percent from 4 percent, even after winning approval from parliament to raise its share of equities to 70 percent from 60 percent.
Slyngstad, who became CEO in 2008, just as the global economy was sinking into the worst crisis since the Great Depression, noted that back then the fund rode out the turmoil by dumping bonds and buying stocks.
“I don’t expect that we will act differently in any similar crisis in the future,” he said.
During a recent conference on globalization, the fund’s chief strategist, Bjorn Erik Orskaug, suggested the world might be at an “inflection point” in trade, with shallower value chains and less cross-border production.
There is also the protectionist agenda some governments are pursuing.
“Is there also a political situation that could make it more challenging?” Slyngstad said. “Time will tell, but there’s of course a risk on the horizon.”
The wealth fund’s extremely long-term investment timeline allows it to look past the noise coming from governments that come and go, Slyngstad said, adding that the fund will probably stay overweighted in Europe, where it is more of an active investor, but that the only two economies that really matter are the US and China,.
In November, he will head to China for an annual research trip to inform the fund’s investments.
The fund is also looking into making potential changes to its bond portfolio based on GDP weightings.
The investor said that a growing correlation between global bond markets reduces the need for geographic diversification.
As the fund approaches US$1 trillion in value, its stated goal is to safeguard today’s oil wealth for future generations of Norwegians. It has surged in size since its inception two decades ago, generating an annual nominal return of 5.89 percent.
Norway’s government last year started taking cash out of the fund for the first time, to make up for lower oil revenue. Withdrawals are set to hit about 72 billion Norwegian kroner (US$9.3 billion) this year and remain at that level in coming years amid stricter fiscal rules.
The fund’s returns are more than enough to handle those transfers and there is so far no indication it will need to start selling assets to accommodate withdrawals.
Slyngstad said cash flow from bond holdings, real estate and stocks will probably hit 215 billion kroner this year.
The withdrawals from the fund are “significantly lower than our cash earnings,” he said. “We are still net buyers in the market, we just aren’t reinvesting all the cash the fund is generating.”
RESTRUCTURING: Taichung and Taoyuan profited most from local firms moving back high-end manufacturing amid the US-China decoupling of trade ties, the ministry said The government’s “Invest in Taiwan” initiative might this year see NT$627.1 billion (US$21.7 billion) of investment pledges realized, with several firms raising stakes and two dropouts due to customer losses, Minister of Economic Affairs (MOEA) Wang Mei-hua (王美花) said yesterday. Wang made the statement at the monthly meeting of the Third Wednesday Club, a local trade group featuring the top 100 firms of each business sector. Since early last year, the government has launched three programs intended to help local companies grapple with US-China trade rows and the COVID-19 pandemic, mainly through moving production lines back to Taiwan. Thus far, the ministry
JOBS AT RISK? Most Cathay Dragon routes are to be operated by Cathay Pacific or a subsidiary, but it was unclear how Taiwanese workers would be affected Cathay Pacific Airways Ltd (國泰航空) yesterday said it is planning new flight services for Taiwan as it announced a corporate restructuring that included the shutdown of its regional subsidiary, Cathay Dragon (國泰港龍), and could lead to job cuts in Taiwan. Cathay Pacific said the shutdown means that the one round-trip service between Taichung and Hong Kong per day and seven round-trip services between Kaohsiung and Hong Kong operated by Cathay Dragon prior to the COVID-19 pandemic would be terminated. “The parent company is planning a new schedule between Taiwan and Hong Kong,” Cathay Pacific assistant manager for corporate communications Moses Hou (侯恩錫)
OVERHEATED MARKET?: The gauge would be designed to provide more reliable information than private-sector data, and help improve policymaking, the council said The National Development Council (NDC) is considering creating a business climate index on Taiwan’s property market, allowing policymakers to better monitor market movements and intervene if necessary, NDC Minister Kung Ming-hsin (龔明鑫) said yesterday. Kung made the remarks at a meeting of the legislature’s Economic Committee where lawmakers from across party lines voiced concerns about housing price hikes driven by capital repatriation. Kung said that the council is assessing the possibility of creating an index designed to provide more accountable and transparent information than data provided by private-sector market analysts, and could help improve policymaking. The council would compile a report on
STOCK MARKETS TAIEX closes slightly higher The TAIEX closed slightly higher yesterday as market sentiment remained cautious over the Nov. 3 US presidential election. Contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) was again the anchor stabilizing the broader market, preventing the main board from falling into negative territory at the end of the session, dealers said. The TAIEX closed up 14.88 points, or 0.12 percent, at 12,877.25, on turnover of NT$167.982 billion (US$5.81 billion). TSMC, the most heavily weighted stock on the local market, rose 0.44 percent after fluctuating between NT$451 and NT$456. The semiconductor subindex and the bellwether electronics sector