Paris: Emerging countries, notably oil producers but also China, are using ever-greater inflows of foreign currency to buy businesses in industrialized economies arousing suspicions that their motives are political, the OECD says.
And, suggesting last week a code of conduct for “opaque” state sovereign wealth funds (SWFs), it also foresaw that they would move some of their money out of top-rank bonds thereby pushing up long-term interest rates, and into stocks, pushing up share prices.
“Some SWFs are becoming large players in financial markets and their importance is set to go on increasing rapidly as a significant part of global reserve accumulation (currently around one trillion dollars annually) is likely to be deployed into such funds.”
“Altogether SWFs are thought to already manage combined assets of $1.5-2.5 trillion,” the Organization for Economic Cooperation and Development says in its latest review of the world economy.
The OECD argues for transparency in the strategies of SWFs which, it said, some suspect of being fronts for political purposes.
And it sees a rise in defensive measures in the old industrialised economies against the purchase of businesses in their increasingly privatized economies by state investment vehicles.
The largest of these funds by far is operated by the United Arab Emirates, followed by funds in Norway and probably Singapore.
“The more recent Chinese SWF will manage assets of $200 billion but two-thirds of this amount will be placed in investments designed to recapitalize Chinese banks, leaving around $67 billion to be invested in world markets.”