BlackRock Says SWFs Remain Committed to the Euro, Despite Crisis

(August 3, 2011) — Sovereign wealth funds haven’t lost faith in the Euro, a senior money manager at BlackRock said at a media briefing.

“Part of the reason the euro remains fairly entrenched is that there hasn’t been a wholesale diversification away from the euro during this crisis,” said Scott Thiel, chief investment officer of fixed income, according to the Wall Street Journal.

Long-term, Thiel asserted that big investors may diversify away from G-3 holdings toward emerging-market debt or gold. Evidence of this came this week as South Korea’s central bank bought gold for the first time in 13 years, diversifying its foreign reserves away from the dollar. “The gold purchase, as a safety net, will help us cope with volatile global financial markets and enhance investor confidence in Korea in times of crises,” Hong Taeg-ki, chief of the central bank’s reserve management group, told Singapore-based TODAYonline.

Recent statements by the heads of the China Investment Corporation (CIC) and the Chinese Social Security System reiterated faith in the euro – and concern over the value of the U.S. dollar.

According to Reuters, the CIC – a $300 billion fund that is increasingly prominent on the world stage – is viewing the short-term European debt worries as but a bump in an otherwise smooth road. “There is nothing to be worried about,” Laurence Lau, chairman of the Hong Kong office of CIC, recently told reporters, according to Reuters. “The euro will not fall apart.” Buttressing the CIC view is Chinese Premier Wen Jiabao, who is “still confident” that Europe can emerge from the crisis that currently surrounds it and Greece.