Central Banks Boost Holdings of Equities Beyond $1 Trillion

(Bloomberg) -- Central banks increased their holdings of equities beyond $1 trillion last year as they sought to diversify their reserves away from low-yielding bonds, according to a survey to be published on Wednesday.

Monetary authorities boosted their allocation of equities to 10% of their reserves despite recent market volatility and a quarter of them said they plan to purchase more stocks in the next two years, research group OMFIF said.

Behind the buying is the need for central banks to find ways to keep their reserves growing after their own easy monetary policies suppressed bond yields worldwide. The Bank of Japan, Bank of Israel and Swiss National Bank are among those to have publicly disclosed investments in stocks in the past.

Central banks are still wary of taking on too much risk no matter the returns on offer. Their holdings are minuscule when compared to the $77 trillion of outstanding equities.

The share of investments in corporate bonds rose to 7% last year and 15% of respondents planned to purchase more in the next two years.

The dollar remained the most popular currency, representing about 70% of the exposure of those central banks surveyed. That dwarfed the 14% share of the euro and the pound’s 2.9%. A fifth said they wanted to increase their exposure to the Chinese yuan, which represents just 0.7% of holdings.

Meantime, gold is the more popular among monetary authorities than at any time in 50 years. In the first quarter alone, such institutions bought 163.3 tonnes of the metal with Russia, Turkey and Kazakhstan leading the purchases, OMFIF said.

To contact the reporter on this story: Simon Kennedy in London at skennedy4@bloomberg.net

To contact the editors responsible for this story: Stephanie Flanders at flanders@bloomberg.net, Andrew Atkinson, David Goodman

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