Is Norway calling the bottom of global property markets? Its central bank has given approval for its oil-funded sovereign wealth fund to invest up to 5 per cent ($22bn) in the asset class. “Investments will principally be made in well-developed markets and within traditional types of real estate,” Finance Minister Sigbjoern Johnsen told Reuters. “We must be prepared for real estate prices to fluctuate a good deal.”
Norway has form calling turning points. Last year the fund was allowed to increase its proportion of equity holdings to 60 per cent. During that year, major indices rose about 50 per cent. The fund made 13.5 per cent in Q3 alone. I wonder if they’re planning to reduce the equity proportion now (Bloomberg).
The Norwegian central bank is to keep its key policy rate at 1.75 per cent, and the executive board plans to keep it between 1.25 and 2.25 per cent until the publication of the next report in March. This comes in spite of bubble warnings from Nouriel Roubini.
Among the factors listed are a stronger-than-expected krone – although since mid-January the krone has been falling against the dollar – and has been falling against the euro since December. A rise in interest rates would tend to further strengthen the krone. Read more
The Norwegian central bank is risking an asset bubble by keeping interest rates close to the US benchmark in order to contain krone gains and protect exporters.
So says Nouriel Roubini, NYU professor, and, more important these days, one of the few who correctly predicted the financial crisis. “Even in Norway there is no willingness to raise rates – despite inflation and robust growth – because of concerns about the currency. That means you are feeding real estate and other bubbles,” Mr Roubini told Bloomberg in Oslo today. Read more
Norway’s sovereign wealth fund has excluded 17 tobacco producers from its $450bn portfolio for ethical reasons, the government said today. “The divestment of shares in these companies has now been completed,” the finance ministry said.
The central bank-managed Government Pension Fund follows ethical guidelines set by the government and in the past has excluded companies that produce nuclear arms or cluster munitions, damage the environment or abuse human rights or workers’ rights. Read more