The prices of many companies plummet in the Corona crisis. Saudi Arabia’s wealthy sovereign wealth fund is taking the opportunity to go shopping and acquire shares in US companies. So that he doesn’t run out of money, the leadership in Riyadh injects fresh capital.
Saudi Arabia’s central bank has transferred $ 40 billion to the Kingdom’s sovereign wealth fund. The state investor is using the financial consequences of the corona pandemic to acquire minority interests in American companies. “We are in a very unusual time. This is a very exceptional one-off transaction that has been done after careful consideration,” Saudi Finance Minister Mohammed al-Jadan told the Wall Street Journal in a phone call. “It was decided that this might be an opportunity that we shouldn’t waste.”
The approximately $ 300 billion public investment fund (PIF) acquired approximately $ half a billion worth of shares in Facebook, Walt Disney and the Marriott International hotel group in the first quarter, according to a statement to the regulator.
The fund also invested similar amounts in Cisco Systems, Citigroup, Bank of America, Carnival and Live Nation Entertainment. The Saudis acquired a stake of $ 714 million in the aircraft manufacturer Boeing.
Diversification of the economy
According to al-Jadan, who sits on the PIF board, $ 15 billion was transferred to the sovereign wealth fund in March and another roughly $ 25 billion in April. So far, however, only a small part of it has been spent. “They are still looking for good assets to buy,” said the finance minister.
Crown Prince Mohammed bin Salman commissioned the sovereign wealth fund in 2015 to diversify the economy in order to reduce his country’s dependence on oil. The PIF is designed to invest in companies and industries that have nothing to do with oil. The fund’s recent buying spree testifies to a bold strategy to invest in global stocks, even though Saudi Arabia’s financial situation is the most precarious in ten years due to the corona pandemic and a drop in oil prices.
Concern that lowering the reserve assets could put pressure on the national currency, Riyal, al-Jadan rejected. “No, not at all. I think it is a very well calculated step,” he said, but added that he did not expect this to be repeated.
Saudi Arabia’s reserves fell $ 27 billion in March, the largest drop in a single month in 20 years. In April, there will be another $ 24 billion decline, the finance minister said. The Saudi central bank would then have approximately $ 455 billion left.
– .
