Saudi continues to dump stocks and bonds in a panic. hundreds of billions of dollars.
I do think this explains the sharpness of the downturn and some of the correlation between stocks and oil. If oil rises back to $50 then saudi might not sell as much. If oil drops to $20, Saudi will sell everything at whatever price.
This is all bullish I think - just a temporary airpocket of too much selling.
And I'm sure every oil country that has a sov wealth fund is doing the same thing.
As Marketfield Asset Management CEO Michael Shaoul writes, this reduces its rolling 12 month holdings by $115.2 billion, outpacing Saudi Arabiaâ€™s record pace of accumulation in 2012. Certainly, the decline has only put holdings back to their August 2012 levels, double 2007 levels, but Shaoul writes that the speed of the decline is meaningful, as it â€œindicates a degree of duress.â€
Moreover, this December data doesnâ€™t cover the latest oil selloff.
More detail from his note:
Our concern is not whether Saudi Arabia can â€œaffordâ€ to run down its foreign asset holdings (it clearly can, since even the current pace could be absorbed for two or three years and still leave a large reserve holding), but what the effect of a $230 bln swing in its funding position since 2012 means for global asset markets given that it comes on top of a much larger swing by China.We view Saudi Arabia as the second largest contributor to QT (Quantitative Tightening â€“ a central bank divesting assets) and we suspect that a good deal of the liquidation has taken place in actual credit and equity markets rather than in treasuries (there is no transparency in the data so this is mere supposition on our part).