Nor­way’s US$1 tril­lion wealth fund to drop oil and gas stocks

The Star Malaysia - StarBiz - - Front Page -

OSLO: Nor­way’s tril­lion-dol­lar sov­er­eign wealth fund is propos­ing to drop oil and gas com­pa­nies from its bench­mark in­dex, which would mean cut­ting its in­vest­ments in those com­pa­nies, the deputy cen­tral bank chief su­per­vis­ing the fund told Reuters, send­ing en­ergy stocks lower.

If adopted by par­lia­ment, the fund would over time di­vest bil­lions of dol­lars from oil and gas stocks, which now rep­re­sent 6% – or around US$37bil – of the fund’s bench­mark equity in­dex.

The aim is to make the Nor­we­gian gov­ern­ment’s wealth less vul­ner­a­ble to a per­ma­nent drop in oil prices.

Europe’s in­dex of oil and gas shares hit its low­est level since mid-Oc­to­ber on the news and was trad­ing down 0.27% at 1351 GMT.

The pro­posal came in a let­ter sent by the cen­tral bank to the fi­nance min­istry and signed by its gover­nor, Oeystein Olsen, and the chief ex­ec­u­tive of the fund, Yngve Slyn­gsad, deputy cen­tral bank gover­nor Egil Mat­sen said in an in­ter­view.

“Our ad­vice is to sim­ply re­move the oil and gas sec­tor, as it is de­fined in the FTSE ref­er­ence in­dex, from the fund’s ref­er­ence in­dex,” Mat­sen said.

“That would mean all com­pa­nies that the FTSE has clas­si­fied with the sec­tor, should be re­moved from our ref­er­ence in­dex.”

The fund is the world’s largest sov­er­eign wealth fund. It in­vests Nor­way’s rev­enues from oil and gas pro­duc­tion for fu­ture gen­er­a­tions in stocks, bonds and real es­tate abroad.

It is among the largest in­vestors in a wide range of oil com­pa­nies, hold­ing stakes at the end of 2016 of 2.3% in Royal Dutch Shell, 1.7% of BP, 0.9% of Chevron and 0.8% of Exxon Mo­bil .

“The risk for the oil sec­tor is how many in­vest­ment funds will down­size their ex­po­sure to ex­trac­tive in­dus­tries,” said Ja­son Ken­ney, oil an­a­lyst at bank San­tander.

The fund also held 1.7% of Italy’s Eni, 1.6% of France’s To­tal and 0.9% of Swe­den’s Lundin Petroleum, among oth­ers.

At the end of the third quar­ter, Royal Dutch Shell was the fund’s third-big­gest equity in­vest­ment over­all, worth around US$5.34bil and ex­ceeded only by its own­er­ship in Ap­ple and Nes­tle.

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