InvestorQ : Is it true that the selling of SWFs has been the result of weak oil prices?
indhumathi Sayani made post

Is it true that the selling of SWFs has been the result of weak oil prices?

Answer
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shrinidhi Rajan answered.
5 months ago


In a way, SWF selling in Indian markets has been driven by weak oil prices. Between January and March, Brent Crude fell from $67/bbl to $22/bbl. Even after a recent bounce, current market price is way below break-even point. Most oil producers rely on oil profits to fund their national welfare plans. Between 2015 and 2017, Saudi Arabia had to draw down $250 billion from its SWF investments to fund welfare costs. Such an eventuality can force selling of stocks, as we are seeing now. SWFs tend to be passive investors and the most common trigger for SWFs to sell is a sharp fall in oil prices. Norway SWF has a 1.2% exposure ($15 billion) to India and other SWFs from Abu Dhabi, Kuwait and Qatar are also significant. These SWFs are surely selling to make up for their oil losses.