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UPDATE 3-Norway wealth fund sees turbulent times ahead on financial markets

Tue, 18th Aug 2020 08:29

* Sees disconnect between markets and real economy

* Says pandemic still not under control

* Fund returned -3.4% in H1 2020

* Graphic: https://tmsnrt.rs/2Y9PbQL
(Recasts with deputy CEO interview)

By Gwladys Fouche and Terje Solsvik

OSLO, Aug 18 (Reuters) - Norway's $1.15 trillion wealth fund
expects more turmoil on financial markets as the world continues
to fight the COVID-19 pandemic, a top fund official said on
Tuesday, after it posted a 188-billion-crown loss ($21 billion)
in the first half of 2020.

The pandemic is not under control "in any shape or form" and
remains the biggest issue for investors, said deputy CEO Trond
Grande, after presenting the half-year results of the world's
largest sovereign wealth fund.

The fund lost $153 billion between January and March as
markets plunged, its worst quarter ever, but earned back $131
billion from April to the end of June amid a rebound, its best
quarter on record.

"We could be in for some turbulence this fall as things
unfold and whether or not the coronavirus pandemic recedes, or
gains some force," Grande told Reuters.

"We have already seen some sort of V-shaped recovery in the
financial markets. I think there is a slight disconnect between
the real economy and the financial markets," he said, noting
that government support for economies could only be sustained
for so long.

The full fallout for some sectors, such as leisure and
travel, was yet to be seen, Grande said.

Founded in 1996, the fund holds stakes in around 9,200
companies globally, owning 1.5% of all listed stocks. It also
invests in bonds and real estate.

Its overall value is equivalent to approximately $214,000
for every man, woman and child in Norway.

The overall portfolio had a negative return of 3.4% in the
first half of the year, with declines of 6.8% for equities and
1.6% for unlisted real estate, while the value of fixed-income
holdings rose 5.1% as interest rates plunged.

The overall return was 11 basis points lower than the return
on the fund's benchmark index.

Oil companies were the weakest performers, with their stocks
declining by 33.1% due to the slide in crude prices, while
technology firms had the strongest development, gaining 14.2%.

At the company level, technology firms Amazon,
Microsoft and Apple contributed the most to
the performance, while oil firm Shell and banks HSBC
and JP Morgan Chase performed the worst.

(Editing by Catherine Evans and Nick Tattersall)

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