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04 March 2020

Norway wealth fund cuts Saudi Stocks during benchmark review

Saudi Arabia was the Government Pension Fund Global’s biggest market for equity investments in the Middle East after Israel at the end of 2018 but dropped to the sixth position in 2019

Government Pension Fund Global owned about 1.5 per cent of the world’s listed equities at the end of 2019/Bloomberg

by Bloomberg

Norway’s $1.1 trillion Government Pension Fund Global reduced holdings of Saudi Arabian equities by about 60 per cent last year as it reviews an internal benchmark that guides its global stock purchases.

According to Norges Bank Investment Management, the state investor’s total investment in shares traded in Riyadh fell to $420 million by the end of 2019 from around $1 billion in 2018. In contrast, holdings increased in other markets in the region including the UAE, Egypt, Qatar, Kuwait, Turkey and Israel.

Yngve Slyngstad, the CEO of the Government Pension Fund Global, said that the fund sold more than two-thirds of its Saudi equities last year, although the value of its holdings fell by less than that because of positive market returns.

Slyngstad said that the divestments did not reflect any view taken by the fund on the outlook for the market but rather stemmed from the review of its internal benchmark.

The sovereign wealth fund had earlier increased its Saudi holdings in anticipation of the Kingdom’s addition to the internal gauge, which is based on the FTSE Global All Cap Index. That inclusion was, however, put on hold in 2018 while the Norwegian government reviews the composition of the benchmark.

The Finance Ministry is expected to present its conclusions on the index composition in the coming weeks. The fund now expects that Saudi Arabia will not be part of the index after that review.

The review also explains why the Norwegian fund did not participate in Saudi Aramco’s initial public offering last year. The sovereign wealth fund held no shares in the oil producer at the end of 2019.

The fund invests Norway’s revenue from oil and gas in stocks, bonds and real estate abroad in order to avoid overheating the domestic economy and to save as much wealth as possible for future generations. Government Pension Fund Global owned about 1.5 per cent of the world’s listed equities at the end of 2019.

RELATED STORIES: Government Pension Fund Global Saudi Aramco Norges Bank Investment Management





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