Russian and Saudi investors cut US assets

A close-up of the front of the US 10-dollar bill bearing the portrait of Alexander Hamilton, America's first Treasury Secretary, is seen on December 7, 2010 in Washington, DC©Getty

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Investors in Russia and Saudi Arabia cut their combined holdings of US securities by more than $50bn between the middle of 2014 and 2015, as the commodity price rout reverberated through global markets.

Russian and Saudi Arabian investors sold US stocks and corporate bonds as the price of oil fell and many emerging market currencies — including the rouble — tumbled against the dollar. An annual US Treasury survey released on Tuesday showed that the Gulf country reduced its holdings of US stocks by $26bn to $52.4bn over the year.

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Earlier this month the Treasury revealed for the first time the scale of Saudi purchases of US government debt — including by central banks, sovereign wealth funds and residents — which slipped by $3bn to $116.8bn from February to March this year.

Brent, the international crude benchmark, has fallen 57 per cent from its 2014 high, and the decline has prompted finance ministers in both countries to seek new funding sources to plug widening budget gaps.

Saudi Arabia, the world’s largest oil producer, has lined up banks ahead of an expected $15bn bond sale later this year. Meanwhile, Russia sold $1.75bn worth of debt last week in its first euro deal since sanctions were imposed.

Investors in Russia have steadily shed US assets since the financial crisis, with holdings more than halved from a 2008 peak to roughly $73bn by the end of last June.

While the report underlined the difficulties facing the two governments, it also underscored the appetite foreign buyers have had for US assets as yields on European and Japanese sovereign debt slid into negative territory.

Foreign ownership of US securities reached a record $17.1tn by June 2015, up 4 per cent from a year earlier as investors in the UK, Luxembourg, the Cayman Islands and Ireland added to their holdings.

Financial institutions, brokers and custodians responding to the survey reported a $159bn jump in holdings of US assets by UK portfolios, the largest increase last year.

Residents of several emerging markets also reported a rise in US security ownership, including Mexico, Brazil, Turkey and India, the Treasury report showed.

The Treasury has sought to improve the annual survey, which it characterised as “imperfect” on Tuesday. Ownership can be masked by the purchase of stocks or bonds through a financial intermediary, a point investors note elevates countries such as Belgium in the analysis.

eric.platt@ft.com

Twitter: @ericgplatt

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The article Russian and Saudi investors cut US assets was originally published at FT.com.