China’s SAFE is biggest public sector holder of equities
June 23, 2014 Leave a comment
China’s SAFE is biggest public sector holder of equities
Staff Reporter
2014-06-19
Central banks worldwide have become major players in global equity markets, with a recent report showing that China’s State Administration of Foreign Exchange (SAFE) is the largest public sector holder of equities, according to Shanghai’s China Business News.
A report by the Official Monetary and Financial Institutions Forum (OMFIF) showed that central banks are experiencing a decline in income due to low interest rates, with some central banking investors becoming major investors in the equity markets, which could potentially overheat asset prices.
Among the global central banks that have sped up investment in the stock market, China stands out. The report indicated that SAFE, which operates under the People’s Bank of China, the country’s central bank, is the world’s public sector equity owner and administers US$3.9 trillion in foreign exchange reserves.
The Chinese central bank has been directly buying minority equity stake in important European firms. SAFE’s interest in Europe could be seen as part of China’s strategic move because it has helped counterbalance the monopolization of the US dollar, which also reflects China’s ambitions in the global finance sector, according to the report.
The OMFIF reached the conclusion based on the US$29.1 trillion market investment made by 400 public sector institutions in 162 countries.
In addition to central banking investors, the equity market’s ability to draw capital can be seen in the large hedge funds.
A report released by the Bank of America Merrill Lynch last Friday showed that global equity funds attracted US$11.4 billion on June 11, which was the largest since February.
Meanwhile, EPFR Global data also reflected that the equity fund market in emerging countries also drew new capital of US$2.3 billion, the largest capital inflow during the last nine weeks.
The policy of maintaining low interest rates has contributed to economic revival in economies headed by Europe and the United States, but it has also stimulated global central banks to accelerate investment in the equity market. However, the European Central Bank’s adoption of negative interest rates in June has widened the scale of the global quantitative easing policy, in which low interest rates are likely to linger for a longer period of time and further create an ideal environment for arbitrage trading.
About bambooinnovator
Bamboo Innovator 