On The Influence Of Sovereign Wealth Fund On Financial Market Stability

Sovereign Wealth Funds originated from global economic imbalances, and its influence on international financial market has long been a controversial topic. Morgan Stanley’s Stephen Jen has pointed out that, the vigorous development of Sovereign Wealth Funds has significant meanings to global financial markets, and they will completely change the operation system of financial markets and the feature of the global financial risks. However, due to the low transparency and strategic purpose, western developed countries have been resisting Sovereign Wealth Funds all the time. During the subprime crisis of USA, Sovereign Wealth Funds’ good behavior has gained the international society’s praise, which couldn’t change the judgment of the Sovereign Wealth Funds threat. On the whole, discussions about the impact of Sovereign Wealth Funds on the financial market stability are still controversial, and an deep study on this issue will have great practical significance.Sovereign Wealth Funds as the public wealth management institution that helps national government to resist the market price fluctuations, implements the national economy transformation and improves the efficiency of reserve assets management, has developed into an important participant in the global investment activities. This dissertation adopts the method of combining qualitative analysis and quantitative analysis to demonstrate the influence of Sovereign Wealth Funds on the global financial asset prices and the international capital flows, and draw the conclusion that Sovereign Wealth Funds will not pose a threat to the stability of financial markets development, but thanks to its "buy and hold" long term investment strategy and the effectiveness of "counter-cyclical" mechanism, it is conducive to maintain the stability of financial markets and has a positive effect on financial markets stability. Finally, the development of Sovereign Wealth Funds deserves support, and this dissertation puts forward policy suggestions from the view of external environments and its internal conditions. In the future, Sovereign Wealth Funds will strengthen international supervision, increase transparency, and insist on diversification strategies and so on to improve their investment operation, making it better to promote the steady development of international financial markets.