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Norway Oil Fund Expects To Boost China Stock Holdings

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OSLO - Norway's $712 billion oil fund expects to significantly increase its Chinese equity holdings this year, Chief Executive Yngve Slyngstad said on Friday, while confirming the fund has applied to increase its $1 billion quota of Chinese A-shares.

"We have a quota of Chinese shares listed in Shanghai or Shenzhen of $1 billion, which has so far been their upper limit," said Mr. Slyngstad in an interview with Dow Jones Newswires. "Now they [the Chinese authorities] have changed this, and removed the upper limit for state-owned funds such as ours."

The oil fund, officially titled the Government Pension Fund Global, is the world's largest sovereign wealth fund and is derived from Norway's oil profits. In 2012, the fund became the first international investor in China to be awarded the maximum quota of $1 billion A-shares.

According to Mr. Slyngstad, Chinese authorities last year increased the total equity investment quota for all foreign investors to $80 billion from $30 billion. He added that as far as he was aware, China hasn't started awarding individual new quotas yet.

"We expect that when they start assigning quotas, we will get a significant share of those, and in that respect we can expect our investments in Chinese equities to be significantly higher at the end of 2013," Mr. Slyngstad said, adding that "we have already applied."

He wouldn't elaborate on how much extra the fund would invest in China. The fund's Chinese equity investment stands at 1.6% of its total NOK2.335 trillion ($410 billion) equity portfolio, representing its biggest holding in an emerging market. At the end of 2012, the fund owned shares in 303 companies in China.

The oil fund said Friday that its equity investments in China, the world's second-largest economy, returned 13% in 2012.

In a major strategic change last year, Norway decided to shift a larger share of the oil fund's assets into emerging markets to reduce long-term risk by tapping into the world's fastest-growing regions. The change of direction was requested by the country's central bank, which manages the oil fund on behalf of the government.

"Norges Bank has clearly expressed an ambition to spread investments and become stronger in emerging markets," Norway's central bank Governor Oystein Olsen told Dow Jones Newswires Friday.

"China is an economic giant globally, which suggests a substantially bigger weight in the portfolio in the future," he added.

Copyright (c) 2012 Dow Jones & Company, Inc.

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