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Study: Central Banks Have Turned Into Major Stock Buyers

By    |   Monday, 16 Jun 2014 02:47 PM

Some financial commentators have complained that central banks have artificially boosted global stock prices with their massive easing programs.

But a new study from the Official Monetary and Financial Institutions Forum, a private research group, shows that many central banks are actually putting their money directly into stocks.

"The buildup of central banking interest in equities is one of the unexpected consequences of the last few years' fall in interest rates, which has depressed the returns on central banks' foreign exchange reserves and driven them to find alternative investment targets, David Marsh, managing director of the Forum, writes in his MarketWatch column.

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And he sees potential danger from the central bank stock buying. It "could potentially contribute to overheated asset prices," Marsh warns.

His group's report focuses on investments by 400 central banks (n=157), public pension funds (n=156) and sovereign wealth funds (n=87) in 162 countries. These institutions have boosted their investments in publicly traded stocks by at least $1 trillion in recent years, according to the study.

A People's Bank of China division is one of the biggest investors in stocks, the study found.

As for the Federal Reserve, it doesn't buy stocks. But it does purchase Treasurys and mortgage-back securities — to the tune of $45 billion a month now, down from $85 billion last year.

Some economists are worried that the Fed's $4.3 trillion balance sheet represents a risk to the financial system.

But Fed officials themselves are more concerned about what selling those assets could do to the financial system and thus aren't planning to shed them in big numbers for years, Bloomberg reports.

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Some financial commentators have complained that central banks have artificially boosted global stock prices with their massive easing programs.
central, banks, stock, buy
291
2014-47-16
Monday, 16 Jun 2014 02:47 PM
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