ZURICH, February 1 (Reuters) – The Swiss National Bank will not be deterred from an expansionary monetary policy path by the United States’ appointment of Switzerland as a currency manipulator, Chairman Thomas Jordan said on Monday.
The SNB still sees foreign currency intervention and negative interest rates as important to stem the appreciation pressure on the Swiss franc, Jordan told the SRF ECO TV show.
“This designation by America will have no effect on our monetary policy,” Jordan said, referring to a description used by the US Treasury Department in December.
The SNB spent more than 100 billion Swiss francs ($ 111.51 billion) on foreign currency in the first nine months of 2020 to slow the franc’s advance, which investors seeking safe havens seek.
“Right now, this foreign exchange intervention is very important because we have seen huge pressure on the franc, especially in the COVID crisis,” he said.
He said that Switzerland was in fact “nothing but a currency manipulator”, pointing to the appreciation of the franc over the past 12 years and low inflation.
Although Jordan said he had not yet spoken with newly appointed US Treasury Secretary Janet Yellen, talks would take place first on a technical level and then political between the two countries to clarify Switzerland’s position, he added.
Although the SNB is not a “fan” of negative interest rates, there is no alternative due to low interest rate policies elsewhere, he said.
If the SNB raises its policy rate from the current level of minus 0.75%, the value of the franc will increase massively and the Swiss economy will be paralyzed.
“We must … pursue a monetary policy that makes sense in the interest of the country as a whole,” said Jordan.
“Right now, unfortunately, that means interest rates are very low. As soon as possible, we will raise interest rates. “($ 1 = 0.8968 Swiss francs) (Reporting by John Revill; Editing by Nick Macfie)
LONDON (Reuters) – Some of the world’s largest sovereign wealth funds and public pension funds are caught in rising technology-related tensions between the United States and China, according to a Reuters analysis of their archival data and public disclosures.
These range from the sovereign wealth funds of Norway and Singapore to the Swiss central bank and the US $ 1.1 trillion TIAA, which was founded more than a century ago by Andrew Carnegie as the American Teacher Insurance and Annuity Association.
US investors are barred from owning stakes in more than 40 Chinese companies seen as having military ties in a series of moves since November as US President Donald Trump seeks to strengthen his hardline policies toward Beijing.
That prompted Nuveen’s TIAA unit to sell stakes in blacklisted companies including China Telecom, China Mobile and China Unicom, as well as microchip giant SMIC, state oil company CNOOC and cellphone and gadget maker Xiaomi.
Other US public pension funds are expected to follow.
CalPERS, the largest fund, holds Hong Kong-listed ‘H’ shares in several companies, including a 1.1% stake in China Telecom and 0.2% of China Mobile and China Unicom respectively, according to Refinitiv data. CalPERS, which has been criticized by Republican politicians for its investment in China, did not respond to a request for comment.
Florida State Administration, which manages $ 200 billion in assets and has small stakes in China Telecom, China Mobile and Xiaomi, according to Refinitiv data, told Reuters it would comply with the ban.
“Those sanctions really bite US institutions,” said Elliot Hentov, head of policy research at State Street Global Advisors.
And the ripples aren’t just felt in the United States.
A number of sovereign wealth funds (SWF) have been affected as the New York Stock Exchange and index providers MSCI, S&P Dow Jones, and FTSE Russell have removed blacklisted companies from the benchmark, causing some share prices to drop more than 20%.
Norway’s $ 1.3 trillion SWF, the world’s largest, owns a 0.2% -0.6% stake in China Telecom, China Mobile, Xiaomi, CNOOC and China Unicom Hong Kong as part of its $ 35 billion Chinese equity portfolio. more broadly, according to the most recent disclosure running through early 2020. It said it would not comment on specific holdings.
Singapore’s GIC, which is referred to as an “independent country investor”, owns 10% of Hong Kong-listed China Telecom’s ‘H’ shares and owns about 1.4% of mainland’s SMIC, A- and H-shares, Reuters calculations based on stock exchange filings shows. GIC declined to comment.
Other holders are the Canadian pension fund Caisse de Depot et Placement du Quebec (CDPQ), British Columbia Investment Management, CPP Investment Board, PGGM Vermogensbeheer, an independent pension fund based in the Netherlands and APG Asset Management.
Non-US investors are not legally obliged to make any changes and many will see the value of their Chinese investment soar in recent years.
China’s equity market is at a 13-year high and the market capitalization of a major technology index has doubled from two years ago.
“We view our investment in China – an important country in the global economy – with a long-term perspective,” CDPQ told Reuters, declining to comment on specific investments.
Graph: Increased Chinese equity investment from the Norwegian sovereign wealth fund –
While China’s increasing weight in global markets is driving state funds to hold onto a larger Chinese portfolio, recent cyber espionage bans and claims of 5G company Huawei and the social media dance craze app TikTok show how technology is now a major geopolitical battleground. .
With no indication of a new approach by US President Joe Biden, China Telecom, China Mobile, Xiaomi and CNOOC shares have fallen between 12% and 22% since being blacklisted in November or this month.
SMIC has bucked the trend with double digit gains.
“Some of the shares that are being released may be taken from owners of bargain-hunting assets outside the US,” said Winston Ma, a former managing director of the sovereign wealth fund China Investment Corp. “However, it may be difficult for them to absorb all of them.”
Graph: Gains mixed for Chinese companies amid blacklist uncertainty –
It wasn’t just Washington’s actions that caused trouble.
Beijing shocked markets in November when it suspended Ant Group’s $ 37 billion IPO plan by a few days and just as the Trump administration pushed through with its ban.
Alibaba, which owns a third of Ant, saw its market value shrink by more than a quarter. These are the top 10 global stocks and are widely held by government funds and pension funds.
US Stock Exchange Commission data sec.report/CIK/0001582202 suggests the Swiss central bank has doubled Alibaba’s stake in the past two years to $ 1.4 billion from the company’s $ 650 billion stake in September.
The November fall will remove about $ 350 million from that holdings. Alibaba shares recovered nearly half of their January losses after escaping a US blacklist.
Graph: Ownership of China Mobile by sovereign wealth funds, pension funds –
Graph: Ownership of Xiaomi Corp by sovereign wealth funds, pension funds –
Graph: Ownership of China Telecom Corp by sovereign wealth funds, pension funds –
Additional reporting by Terje Solsvik in Oslo, Brenda Goh in Shanghai, Anshuman Daga in Singapore, Maiya Keidan in Toronto and John Revill in Zurich; Edited by Catherine Evans
ZURICH, December 9 (Reuters) – Switzerland is likely to meet the criteria of a country the United States will identify as a currency manipulator in an upcoming report from the US Treasury Department, according to people with knowledge of the matter.
Massive intervention by the Swiss National Bank this year to slow the appreciation of the Swiss franc would mean Switzerland will now meet all three criteria to be called a manipulator, the sources said.
While uncomfortable for Switzerland, appearing on the list – which is expected in the next few weeks – does not automatically trigger sanctions or tariffs. The appointment could lead to high-level talks between the United States and Switzerland to resolve the issue.
The SNB declined to comment, while the US Treasury Department was not immediately available for comment.
The SNB spent 90 billion Swiss francs ($ 101.15 billion) in the first half of 2020 to slow gains as investors seek safe havens during the COVID-19 pandemic.
The figure is well above 2% of gross domestic product, a level above which a country’s Ministry of Finance says it is trying to manipulate its currency.
Switzerland also meets two other criteria, having a bilateral goods surplus of more than $ 20 billion and a current account surplus of over 2%.
The US Treasury’s list is intended to identify countries it says are manipulating their currency against the dollar to gain an unfair trade advantage.
Although Switzerland would qualify for the currency manipulator label, the Ministry of Finance may withhold use of the term.
SNB chairman Thomas Jordan has long stressed the need for the central bank to be able to intervene in the currency to ease pressure on the franc, which he consistently described as “highly valued.”
Negative interest rates and interventions have been the mainstay of the SNB’s expansionary monetary policy in recent years, and the US Treasury Department’s move won’t change that.
The Swiss have long argued that they are not trying to weaken the franc to gain trade gains, but are driven more by the SNB’s monetary policy, which aims at price stability. ($ 1 = 0.8898 Swiss francs) (Reporting by John Revill, additional reporting by Andrea Shalal in Washington; Editing by Cynthia Osterman)