PBOC 'biggest sovereign asset holder'

LONDON • People's Bank of China (PBOC) remains the world's biggest sovereign asset holder with more than US$3.4 trillion (S$4.6 trillion) on its books, despite suffering a 12 per cent slump in the value of its assets last year, a new report shows.

The annual report - compiled in its third year by the Official Monetary and Financial Institutions Forum (OMFIF) and to be released in full today - looks at asset management performance by public investors such as central banks, sovereign funds and public pension funds.

The highlights of the report show that total assets under management of the 500 largest public investors fell by 2.9 per cent or US$855 billion to US$28.99 trillion last year.

The decline was driven primarily by world central banks, which saw their assets shrink by 6.1 per cent because of low oil prices, a fall in gold prices and rising capital outflows from emerging market economies.

Meanwhile, public pension funds saw assets fall by 0.6 per cent, while those of sovereign funds grew at 0.04 per cent - their slowest pace in at least a decade, says the OMFIF.

The list of the 10 biggest investors shows little change from the previous year, the report found, with Asian institutions continuing to dominate the ranking.

Within the top 10, the biggest increase was by the China Investment Corporation, Beijing's sovereign wealth fund, which climbed to No. 5 after its assets under management rose by 14.4 per cent.

The move displaced the Saudi Arabian Monetary Agency - the kingdom's central bank - which registered a more than 15 per cent fall in its assets under management, the greatest loss in the top 10.

The report also shows that central banks' net gold purchases accelerated to the highest-ever annual rate last year.

Low interest rates, which reduce the opportunity cost of holding non-yielding bullion, as well as an increased perception of country risk and rising geopolitical uncertainty all helped boost appetite for the precious metal.

Global central bank gold holdings rose 22 per cent in value terms to US$1.36 trillion in the year to end-April, driven by further buying and a rise in gold prices of a similar magnitude.

Acquisitions of gold in recent years have chiefly been driven by China and Russia, as well as Kazakhstan, with purchases by other central banks dwindling.

Gold is becoming more attractive as a freestanding asset not issued by any government or state, at a time when asset managers are querying whether yields are sufficient to cover country risk, the OMFIF report says.


A version of this article appeared in the print edition of The Straits Times on June 30, 2016, with the headline 'PBOC 'biggest sovereign asset holder''. Print Edition | Subscribe