Baku, Azerbaijan, June 11
By Emin Aliyev - Trend:
The State Oil Fund of Azerbaijan (SOFAZ) plans to invest up to $1.8bn in renminbi this year, SOFAZ head Shahmar Movsumov told the Financial Times.
Movsumov added that the fund was applying for permission from Chinese regulators to access renminbi assets.
"It's one of the currencies that are becoming important, so why not invest in renminbi?" he said. "We are in the process of getting all the necessary preparations."
Central banks and sovereign wealth funds hold $11.7tn in assets, according to International Monetary Fund data, but the large majority of their declared holdings are in dollars and euros. Standard Chartered estimates that they hold just $48bn of the Chinese currency - less than 0.5 percent of total reserves.
"SOFAZ decided at the end of last year to increase its exposure to currencies other than the dollar, euro and pound from 5 percent to 10 percent," Movsumov said. The fund has yet to invest about 5 percent, or $1.8bn, of its allocation to "other currencies". Whatever we will have spare by the end of this year we will allocate to renminbi."
Asked which renminbi assets he intended to invest in, he said the fund was "open to everything".
Movsumov said the prospect of a rise in interest rates in the US and Europe had made the fund more cautious about investing in bonds.
"The same trend has led SOFAZ to put its gold buying programme on hold," he said.
"Expectations are that if economies pick up there will be more decline in the price of gold," Movsumov said.
As of April 1, 2014, SOFAZ assets increased by 2.07 percent compared to early 2014 ($35.877.5 billion) and reached $36.618.4 billion.
The State Oil Fund was established in 1999, with a total net worth of $271 million.
As of the first quarter of 2014, some 51.2 percent of the total volume of the investment portfolio of the Azerbaijani State Oil Fund (SOFAZ) is in U.S. dollars ($18.6 billion).
Around 36.9 percent of the investment portfolio is concentrated in euros (9.75 billion euros), 5 percent in British pounds sterling (about 1.08 billion pounds sterling), 1.2 percent in Turkish Lira, 0.5 percent in Australian Dollars and 1.2 percent in Russian rubles, 0.6 percent in Korean won. The rest of the portfolio at 3.5 percent ($1.26 million) is concentrated in gold.
As of January-March, the total sum of SOFAZ's investment portfolio amounted to $36.344 billion or 99.3 percent of total volume of assets, according to the report.
Based on SOFAZ's regulations, its funds may be used for the construction and reconstruction of strategically important infrastructure and facilities, as well as solving important national problems. In 2001-2009 the organization channelled funds to development Azerbaijan's oil and non-oil sectors. Currently, a number of strategically important projects in irrigation and transport areas are being financed by SOFAZ.
The fund's main goals include accumulating resources and placing of the Fund's assets abroad in order to minimise any negative affect on Azerbaijan's economy (by the phenomenon known as 'Dutch disease'), promoting resource accumulation for future generations, and supporting for current social and economic processes in Azerbaijan.