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Less worries about stock trading

The world's largest sovereign wealth fund is making huge profits!

The latest disclosed data shows that in the first half of this year, the Norwegian sovereign wealth fund had an investment return rate of 8.6%, equivalent to earning 147.8 billion Norwegian kroner or 137.9 billion US dollars, equivalent to about 1 trillion yuan. As of the end of June, the size of the Norwegian sovereign wealth fund was 17.745 trillion Norwegian kroner. Among them, 72% of the funds were invested in stocks and 26.1% were invested in fixed income.

In the first half of the year, the Norwegian sovereign wealth fund's stock investment return rate was 12.5%, and the return rate of fixed income investment was -0.6%. In terms of holdings, the fund's top three holdings are Microsoft, Apple, and Nvidia. In the first half of the year, the fund slightly reduced its holdings of Meta, Novo Nordisk, ASML, Tesla, and Volkswagen, while increasing its holdings of three major energy stocks - ExxonMobil, Shell, and BP.

The Norwegian Sovereign Wealth Fund is the world's largest sovereign wealth fund, and has been dubbed the "stock god" by investors for its consistently impressive investment returns. The latest data shows that the fund's size has exceeded 18 trillion Norwegian kroner, equivalent to about 12 trillion yuan.

Profit nearly 1 trillion yuan

On August 14, Beijing time, the Norwegian Sovereign Wealth Fund disclosed its 2024 semi-annual report. In the first half of the year, the fund's return rate was 8.6%, equivalent to 147.8 billion kroner, equivalent to about 985.7 billion yuan. Among them, the return rate of stock investment was 12.5%, the return rate of fixed income investment was -0.6%, the return rate of non-listed real estate investment was -0.5%, the return rate of listed real estate investment was 3.5%, and the return rate of unlisted renewable energy infrastructure was -17.7%.

As of June 30, 2024, the size of the Norwegian sovereign wealth fund is 17.745 trillion kroner. In terms of asset allocation, 72% of the fund is invested in stocks, 26.1% in fixed income, 1.7% in unlisted real estate, and 0.1% in unlisted renewable energy infrastructure.

The Norwegian sovereign wealth fund said that equity investments achieved very strong returns in the first half of the year, with performance mainly driven by technology stocks and increased demand for new solutions for artificial intelligence. In addition, the Norwegian krone depreciated against several major currencies in the first half of the year, and currency changes increased the value of the fund by 315 billion Norwegian krone. In the first half of this year, the fund received 192 billion Norwegian krone.

Specifically, in terms of equity investment returns, the Norwegian sovereign wealth fund said that in the first half of the year, technology companies achieved a very strong return rate of 27.9%. The industry benefited from the strong demand for new artificial intelligence solutions from the largest Internet and software companies and their semiconductor suppliers; the financial industry returned 13.8%, and the strong global economy and increased consumer lending led to increased bank income, and stronger stock markets and increased investment also made positive contributions; healthcare stocks returned 10.3%, thanks to strong demand for medical services, positive results from some major clinical studies, and increased demand for innovative therapies and technologies; basic materials had the lowest return rate of -0.3%.

Fixed income investments returned -0.6% in the first half of the year. A faster-than-expected slowdown in inflation by the end of 2023 has led fixed income markets to price in a significant easing of monetary policy in 2024. However, higher-than-expected inflation in the first half of the year and unexpectedly positive employment and growth, especially in the United States, have led to interest rates remaining above expectations. The Norwegian sovereign wealth fund said government bonds returned -1.8% during the period. The fund's three largest holdings are U.S., Japanese and German government bonds.

According to the financial report, in the first half of the year, U.S. Treasuries accounted for 29.1% of the fund's fixed income investments, with a return rate of 1.1%. During this period, the Federal Reserve kept its policy rate unchanged. The market currently expects two to three rate cuts by the end of the year, lower than the six expected at the beginning of the year.

Euro-denominated government bonds, which make up 12.3% of the fund’s fixed-income investments, returned -3.3%.The ECB cut its policy rate by a quarter percentage point in June, and markets expect two more rate cuts by the end of the year.

Japanese government bonds make up 5.6% of the fund's fixed income investments and returned -13.3%. The Bank of Japan tightened monetary policy in March and no longer set a negative policy rate. This did not prevent the yen from depreciating further and was the main reason for the return to weakness.

Position trends exposed

The Norwegian sovereign wealth fund, which was established in the 1990s to invest Norway's oil and gas revenues abroad, mainly tracks a benchmark index based on a framework issued by parliament. As of the end of June, the fund held shares in more than 8,800 companies around the world. The Norwegian fund traditionally updates its portfolio once a year, but will do so twice a year going forward.

According to the latest disclosed financial report, as of the end of June, the top five holdings of the Norwegian Sovereign Wealth Fund were Microsoft, Apple, Nvidia, Alphabet (Google's parent company), and Amazon, with holdings worth NOK 453.797 billion, NOK 390.805 billion, NOK 377.050 billion, NOK 258.292 billion, and NOK 241.291 billion, respectively, and shareholding ratios of 1.28%, 1.14%, 1.17%, 1.08%, and 1.13%, respectively.

In the first half of the year, the fund reduced its holdings in Meta, Novo Nordisk and ASML. The proportion of Meta's holdings fell from 1.22% to 1.18% at the end of 2023; the proportion of Novo Nordisk's holdings fell from 1.87% to 1.75% at the end of 2023; and the proportion of ASML's holdings fell from 2.61% to 2.54% at the end of 2023. At the same time, the fund also slightly reduced its holdings in Tesla and Volkswagen.

While reducing its holdings in technology and auto stocks, the Norwegian sovereign wealth fund has shown a new interest in energy stocks. The fund increased its holdings in three major energy stocks - ExxonMobil, Shell and BP - in the first half of the year.

Looking ahead, Nicolai Tangen, CEO of Norges Bank Investment Management, the fund's manager, said he does not expect stock markets to rise as much as in previous years. He said a lot of uncertainty and a "completely different geopolitical situation" meant global stocks now faced more risks.

However, there are great differences in the current capital market. Bank of America pointed out in its latest global fund manager monthly survey that as expectations for global economic growth fell to the lowest level in eight months, investors increased their allocation to cash and reduced their overweight positions in stocks in August.

Bank of America surveyed fund managers at 189 asset managers around the world from August 2 to 8, covering $508 billion in assets under management. The survey covered the most turbulent period of last week, when investors made defensive rotations into bonds and cash and sold stocks, but long bets on the "Big Seven" remained the most crowded trade. "The core optimism for a soft landing and large U.S. growth stocks has not wavered," Bank of America strategist Michael Hartnett wrote in a report, "it's just that investors now believe that the Fed needs to cut more to ensure there is no recession."

Kristina Hooper, chief global market strategist at Invesco, pointed out that the market is overly concerned about the US economy falling into recession. Although the Fed's failure to cut interest rates in July has indeed increased the risk of recession, the job market is still in relatively good condition. It is almost certain that the Fed will cut interest rates in September, and it is likely to cut interest rates again in November and December. The current Global Interest Rate Estimation System estimates that the probability of a 50 basis point rate cut in September is 75%.

Allianz Chief Economic Advisor Mohamed El-Erian criticized the Federal Reserve for not cutting interest rates in July, and the uncertainty of the future rate cut path is also causing market uncertainty. He warned that the market's expectations of a 200 basis point rate cut in the next 12 months are too high. He estimated that the Federal Reserve will cut interest rates by 25 basis points in September and 150 basis points in the next 12 months.

Barry Bannister, chief equity strategist at Stifel, a well-known US investment bank, called on investors to act with caution. He said that if the economy continues to slow and eventually enters a recession, a bear market is coming as inflation remains high. UBS CEO Sergio Ermotti said on Wednesday that market volatility may increase in the second half of the year, but he does not think the United States is falling into a recession. UBS expects the Federal Reserve to cut interest rates by at least 50 basis points this year.

Source: China Securities

Statement: All information content of Databao does not constitute investment advice. The stock market is risky and investment should be cautious.

Editor: He Yu

Proofreading: Ran Yanqing

Data treasure