| As Credit Suisse notes, "oil exporting countries hold about $1.7trn of official reserves but as much as $4.3trn in sovereign wealth fund assets." And while the composition of the SWF asset pool is likely to be far more multifarious than the makeup of official FX reserves making it more difficult to assess i) how quickly they could be liquidated in a pinch, and ii) what effect that liquidation would have on USD assets, especially USTs, the important point is that if we have indeed entered a new era in which crude and commodities are destined to trade at comparatively depressed levels, the pressure on exporters to adapt to the new reality could force them to begin drawing down the vast store of SWF assets.
Thus, if one wants to understand how large the petrodollar unwind could potentially be in the worst case scenario, it’s important to take stock of SWF assets...............................................Full Article: Source |