Sovereign wealth funds are driving asset slump, Jefferies says

Sovereign wealth funds from energy-producing countries are exacerbating a global market rout by selling off assets to meet their financial commitments amid slumping oil prices, according to Jefferies Llc. The sales mark a new phase for the countries, after they tried boosting oil production and printing currency to make their payments, David Zervos, chief market strategist at New York-based Jefferies, wrote on Monday in a note to clients.

“We have now entered the phase where the excess savings glut is being replaced with an excess selling glut,” he wrote. As oil prices slid to $30 a barrel, “the asset sales became more aggressive as the true depth of the insolvency issue began to sink in.”

Oil’s decline and slowing growth in China sparked volatile trading at the start of 2016. Iran is aiming to raise shipments by 500,000 barrels of oil a day amid the removal of sanctions, adding to a global glut. Chinese stocks fell into a bear market last week on waning confidence that the government can manage the country’s transition to a new growth model and to a more freely traded currency, while government bond yields fell to a record low.

The Stoxx Europe 600 Index dropped to a 13-month low on Monday, with banks declining on concern the quality of their assets may harm profits. Contracts on the Standard & Poor’s 500 Index slid after the index fell on Friday to its lowest closing level since August. US markets were shut for a holiday.

Zervos said he initially thought market declines this year were in response to nervousness over a weakening Chinese yuan. “I now think this is basically an energy story with China simply a catalyst,” he wrote. Longer term, he wrote, falling energy prices will be positive for the US economy because “a stronger consumer will ‘eventually’ buoy growth and corporate earnings.”



Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Previous Article

Federer says it’s time to name names in match-fixing scandal

Next Article

DAR turns over P25-million farm equipment to Davao tillers

Related Posts

Mergers and acquisitions on the rise

BACOLOD CITY—Financial services giant Morgan Stanley predicts that there will be increased mergers and acquisitions (M&A) activity in the next two years globally. In its “2023 M&A Outlook” published last month, the Manhattan-based multinational investment management firm attributes the acceleration of deal-making to three factors: the growth in the private equity industry; the sophistication of corporate clients; and, the overall strength of corporate earnings.