Terrible sales! 12 trillion assets in crisis, “bloody” Wall Street deal seekers! Britain’s “black swan” flashes, how big is the impact? Europe’s energy crisis adds to the fog | Investing.com

Wall Street “hunted” British assets.

After the huge British government bond shock, British pension funds are being forced to sell assets, including real estate, private credit and shares of venture capital funds. The range is 20% to 30%. According to data from the UK Pension Protection Fund, at the end of August this year, UK pension assets totaled around 1.5 trillion pounds (about 12 trillion yuan).

Another “black swan” illusion in the UK is emerging. On October 6, according to the reference news network cited by Agence France-Presse, Fitch International Credit Ratings Co, Ltd lowered the outlook on the UK government’s debt credit rating from “stable” to “negative”. Perhaps the most dangerous moment in the UK will be on October 21. At that time, Standard & Poor’s and Moody’s, among the three major rating agencies in the world, will reassess the British government’s credit rating. Once the credit rating is downgraded, it will put huge pressure on the UK’s foreign debt, or it will have another effect on the UK financial market.

There is also bad news about the energy situation in Europe, and Europe’s largest natural gas field is in danger of closing. Recently, the Dutch government said that the output of the Groningen gas field will be limited to 2.8 billion cubic meters, and natural gas production will cease completely by 2024 at the latest. It should be noted that the Groningen gas field is the largest natural gas field in Europe. At one time, it produced more than 40 billion cubic meters of natural gas each year, which is equivalent to 10% of the EU’s consumption. Currently, there are still 450 billion cubic meters of recoverable underground natural gas reserves in Groningen. , worth about $1 trillion.

A Dangerous Moment for 12 Trillion Assets

The negative shock from the epic turmoil in the UK bond market continues.

As one of the largest holders of British government bonds, the British pension fund, due to the huge shock in the bond market, needs to collect huge profits and is selling liquid assets, including real estate, private credit and shares of venture capital funds.

According to the British “Financial Times”, since the crisis of the British bond market, in order to raise money, many pension funds are selling equity, venture capital fund shares, real estate and other more illiquid assets at the fastest rate on record.

At the same time, Wall Street institutions that “have not missed any crisis” are aggressively “buying” the declining assets of British pension funds, including Goldman Sachs, Blackstone Group, and Partners Group, a Swiss private equity firm.

Recently, Gabriel Möllerberg, managing director of Goldman Sachs Asset Management, told the media that some of the high-quality private equity fund portfolios of British pension funds have been discounted by 20% to 30%, which is definitely an opportunity.

Separately, a unit of Blackstone Group Inc. are also preparing to buy assets sold at a discount by UK pension funds, some of which are priced well below their face value. The deals could take months to negotiate and move forward, with numbers likely to rise in the coming months.

At the moment, the Swiss private equity firm, Partners Group, is also interested in buying these assets. Ross Hamilton of the agency said that it is possible to get a very attractive buying opportunity under conditions current market. Currently, more than $9 billion of money has been prepared. An exciting opportunity.

Francesco di Valmarana, a partner at Pantheon, an organization that specializes in investing in private equity and fund shares, noted that some investors are now considering selling their shares of funds at a discount of around 10 percent, compared to when they were sold these assets are generally close to their face value at the beginning of the year.

It should be noted that the pension market in the UK is very large. According to data from the UK Pension Protection Fund (PPF), at the end of August this year, the total UK pension assets were around 1.5 trillion pounds (about 12 trillion yuan), up from £400 billion in 2011. Pension funds hold 40% of the UK institutional asset management market and account for two thirds of UK GDP.

Another “Black Swan”.

Another “black swan” illusion in the UK is emerging.

On October 6, according to the reference news network cited by Agence France-Presse, after the new British Prime Minister Liz Truss announced the implementation of the debt-driven emergency tax cut plan, Fitch International Credit Ratings Co raised, Ltd UK government debt credit rating outlook downgraded from “Stable” to “Negative”.

The most important factor in Fitch’s sudden downgrade in Britain’s status is tax cuts and a higher budget deficit. Fitch believes that the huge and unfunded fiscal package announced by the UK government could lead to a significant increase in the fiscal deficit in the medium term. Total UK government debt could rise from an estimated 101% of GDP in 2022 to 109% in 2024.

Separately, Fitch noted that growing uncertainty about UK policy, the chancellor’s statement hinting at the possibility of additional tax cuts, and possible changes to fiscal rules enacted in January, have reduced the predictability of UK fiscal policy.

It is worth noting that the most dangerous moment in the UK could be on October 21. At that time, Standard & Poor’s and Moody’s, among the three major rating agencies in the world, will reassess the British government’s credit rating. If the financial situation remains tight, the UK sovereign credit rating may be downgraded.

Once the credit rating is downgraded, it will put huge pressure on the UK’s foreign debt, and the UK’s external debt financing will face “additional risks”, which may once again have an impact on the UK financial market.

Earlier, Standard & Poor’s had downgraded the UK’s rating outlook from “stable” to “negative”.

In addition, political uncertainty in the UK is increasing rapidly. On October 5, local time, the latest opinion poll released by YouGov showed that Trus’ approval rating had plunged to -59, which is below the historic lows of Boris (-53) and Corbyn (-55).

The survey also found that Truss was viewed positively by a majority of Conservative voters in mid-September, while a majority now view her negatively.

Although Truss was elected Prime Minister of the United Kingdom a short time ago, he has caused huge waves in the British market. According to data compiled by Bloomberg, since the market closed on September 2 (the last trading day when the Conservative Party chose Truss as party leader), Britain’s FTSE 350 index has evaporated around 77 billion pounds of market value; in addition, Phnom Penh Bloomberg Bonds (also known as “prime securities”, public bonds issued by the British government) and the inflation-linked gilts index have lost a cumulative £200bn in market value, and investment bonds named in sterling has lost a cumulative £26bn. It means that the British stock market and bond market have evaporated almost 300 billion pounds (about 2.4 trillion yuan) in one month.

At a critical time, Truss’s statement also caught the market’s attention. According to TCC News on the 6th, on October 5th, local time, Truss delivered a speech at the Conservative Party’s annual meeting in Birmingham, where he reiterated that the Conservative Party has always supported low tax rates and that tax cuts are moral and In this way, tax cuts will help improve the UK’s international competitiveness and attract more talent.

Bad news for European energy markets

Bad news came again in Europe’s energy situation, and Europe’s largest natural gas field is in danger of closing.

Recently, the Dutch government said that the output of the Groningen gas field will be limited to 2.8 billion cubic meters, and natural gas production will cease completely by 2024 at the latest.

According to Dutch broadcaster NOS, the Dutch government is shutting down the Groningen gas field due to frequent local earthquakes caused by natural gas extraction, sparking strong opposition from Dutch residents and explosive protests. Even as Europe prepares for what could be its toughest winter since World War II, the Dutch government has been reluctant to increase production and has even begun to press ahead with the shutdown.

It is worth noting that the Groningen gas field, located in the north of the Netherlands, is one of the largest gas fields in the world. At one time it produced more than 40 billion cubic meters of natural gas each year, which is equivalent to 10% of EU consumption.

Even after half a century of operation, with 450 billion cubic meters of underground recoverable natural gas reserves worth around $1 trillion, Groningen was once called “the only potential game changer in Europe”.

At the moment, Europe is facing a European gas crisis, and the Netherlands is also under pressure from the European Union. In a recent speech, EU Internal Market Commissioner Thierry Breton said the Netherlands should reconsider its decision to close Groningen.

Nevertheless, the Netherlands still adheres to the position of not expanding production. The Prime Minister of the Netherlands, Mark Rutte, said that using Groningen to strengthen supplies would not be completely ruled out, but only in extreme cases where everything goes wrong, which is not needed yet.

Dutch Minister of Mines Hans Vijlbrief also said that continued production is risky, but that the crisis elsewhere in Europe, where there is a lack of natural gas, could force the Netherlands to make a decision to expand production.

On October 5th, local time, Fatih Birol, Director of the International Energy Agency (IEA), said that even if the winter of 2022 can be passed successfully, if the situation does not change, the winter of 2023 will be more difficult for Europe . countries.

Birol said that after a winter of gas consumption, European countries are expected to deplete gas reserves to 25% to 30% of their inventories by February-March 2023. At that time, if the natural gas supply in Europe is not is still effectively resolved, next winter will be more difficult, and European countries will face a more serious energy situation and they need to prepare as soon as possible.

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