Last weekend we explained how as a result of the dying Petrodollar and the plunging price of oil, emerging markets and Sovereign Wealth Funds such as the ones listed below...
... are forced to liquidate tens of billions in equities around the globe in what has become a largely indiscriminate liquidation wave.
As JPM quantified, "assuming selling in accordance to the average allocation of FX Reserve Managers and SWF across asset classes, we estimate that the sales of bonds by oil producing countries will increase from -$45bn in 2015 to -$110bn in 2016 and that the sales of public equities will increase from -$10bn in 2015 to -$75bn in 2016. There is little offset to this -$75bn of equity sales from accumulation of SWF assets by oil consuming countries, as we expect these countries to spend most of this year’s oil income windfall. "
But while over the past week it became well-known that SWFs and EMs are selling equities into the accelerating drop in global equity markets, nobody had actually done an analysis of which stocks are most at risk.
Until today.
In a report released earlier, Deutsche Bank writes "beware European stocks with high EM government ownership" adding that "Fed tightening and lower oil prices have led to EM capital outflows and falling EM FX reserves" as shown in the chart below:
It then notes the following:
While EM government ownership of the European equity market is just 0.5% of market cap, it is up to 25% for individual names. We highlight 23 European companies with EM government ownership of more than 5% of market cap, according to the latest figures available on Bloomberg. While these stocks have already underperformed the market by 18% on a equal-weighted basis over the past year, we are concerned that further capital outflows from emerging markets could lead to more downside risk.
So for those curious which European stocks are most at risk from "oil-contagion" selling by foreign reserve managers, here is the full list.
Tomorrow we will run a comparable screen for US-listed equities to get the complete picture.