Norway's Government Pension Fund Global, the largest wealth fund in the world at $1 trillion, warns about the looming repercussions of rising protectionism brought by the escalating US-China trade war. The warning comes as the fund misses its second-quarter target returns at 0.2 percentage points lower than what was set by the country's ministry of finance.
The fund has actually delivered profitable returns if not for falling short of the 2 percent benchmark target set by its government.
Norges Bank said the fund has managed to bring in $20 billion in the second quarter which is just $1.8 percent increase from its performance during the first quarter. Investments on stocks delivered 2.7 percent in returns, equities delivered 66.8 percent, and unlisted real estate investments brought in a 1.9 percent gain. Fixed income remained at 30.6 percent. As of June 30, the fund had a total market value of $988.4 billion.
Trond Grande, the deputy CEO of Norges Bank, noted that the discrepancy between what the fund delivered and what was its expected performance has resulted from increased trade tensions and weaker growth outlook in the emerging markets and China.
The fund lost 5.7 percent in emerging market stocks and 4 percent on Chinese equities according to Bloomberg. Financial stocks were the worst performers. Grande noted that both North American and European stocks seemed to be resilient despite the increased trade barriers.
In fact, the loss in emerging markets and Chinese equities was compensated by the fund's stocks in U.S. tech companies such as Apple, Amazon, and Microsoft which brought in the largest returns. The fund's largest bond holdings were the U.S. Treasuries which delivered 3.1 percent returns, followed by Japan, and Germany.
In 2010, China froze its ties with Norway after the Norwegian Nobel Committee awarded the prize to Chinese dissident Liu Xiaobo. Beijing closed all discussions and communications involving bilateral free trade with Norway.
The two nations have once again seen eye-to-eye in August of 2017 and resumed trade talks, particularly on their shared advocacy for free trade.
Early this month, Norwegian Foreign Minister Ine Eriksen Soereide and Chinese State Councilor Wang Yi were able to meet on the sidelines of a regional forum in Singapore according to Reuters. The two leaders have since then agreed to speed up free trade talks between the two countries after efforts were done to put the Nobel Peace Prize controversy behind.
Meanwhile, the U.S. and Chinese officials are set to resume trade talks on Wednesday. The negotiations between lower-level officials would hopefully see a meeting between President Donald Trump and President Xi Jinping happening by November.
