Saudi Public Investment Fund looks for more global alliances

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Public Investment Fund Managing Director Yasir Al-Rumayyan pictured at the Future Investment Initiative in Riyadh. (AFP)
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Updated 25 October 2017
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Saudi Public Investment Fund looks for more global alliances

RIYADH: Saudi Arabia’s Public Investment Fund (PIF) is looking for further international partnerships as part of its ambitious aim to become the largest sovereign wealth fund in the world.
Yasir Al-Rumayyan, PIF managing director, said that global investment alliances would be a central part of a four-legged strategy.
He was speaking as PIF formally announced a $20 billion alliance with the US investment fund BlackRock to put money into what he called “conventional investment” like infrastructure and large-scale construction projects, and on top of the $45 billion agreed with Japan’s SoftBank.
“We will continue to see partnerships with the rest of the world, and conventional investments will not go away,” he said at the opening session of a major conference hosted by the PIF in Riyadh, the Future Investment Initiative.
He added that PIF is targeting annual returns of between 3 and 9 percent across its portfolios in the long term.
“PIF is a long-term fund. We are looking beyond cyclicality,” he said.
Al-Rumayyan spelled out the rest of the strategy. “We want to grow and diversify revenue across all investments. We want to localize the economy of Saudi Arabia for the future employment of citizens, and we want to expand in new sectors, like waste management, real estate and entertainment.”
Panelists included the CEO of Saudi Aramco, Amin Nasser, BlackRock Chairman Larry Fink, IMF Managing Director Christine Lagarde and Victor Chou, CEO of First Eastern Investment Group.
They were quizzed on their outlook for investment returns as individuals and states worldwide grapple with how to ensure sufficient retirement funds during an extended period of low growth across global economies.
Al-Rumayyan said that some assets could reach annual returns in the low teens.
“We don’t want to be a sitting duck to be shot down by only being in conventional investments. We want to go beyond — that is what Vision 2030 is all about,” he said.
He also revealed that he wants the Future Investment Initiative to become an annual event, which would help the Kingdom prepare for the future.
Questioned on the long-term prospects for the oil economy in the face of the renewable and alternative fuels industry, Nasser said it would take decades for the oil and gas industry to be significantly affected by these changes.
BlackRock’s Fink warned: “Long-term growth rates are decelerating quite rapidly and this is going to  present pension funds with bigger liability issues  —  but this is also one of the reasons we have to address this issue of retirement today with expected returns — whether it’s 4, 6 or 8 (percent).
“It means you have to put money away sooner to get to the expected pool of money you want in retirement.”
Asked about his own forecasts for what was possible and realistic as an investment return, he said: “The BlackRock Investor Institute came out with a 10-year forecast of 4 per cent with a balanced portfolio. I tend to think it will be closer to 6 percent.  We’re in a world of low inflation.”
Hundreds of the biggest names in global business are attending the event in Riyadh, which concludes tomorrow.


Turkish lira weakens after cenbank repos resume, FX purchase move

Updated 14 min 14 sec ago
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Turkish lira weakens after cenbank repos resume, FX purchase move

ANKARA/ISTANBUL: The Turkish lira weakened on Tuesday after the central bank lowered the swap market lira interest rate and held a repo auction for the first time in nearly two weeks, reversing a policy tightening step it had taken to support the currency.
A currency crisis last year wiped nearly 30% off the lira’s value against the dollar and it has fallen further in 2019.
The lira weakened as far as 6.0860 against the US currency after the central bank moves, compared with a close of 6.0315 on Monday. At 1012 GMT, it stood at 6.0500.
The central bank injected 17 billion lira ($2.8 billion) in the repo, the first since it suspended them on May 9. It lowered the lira interest rate in swap transactions to 24% from 25.5%. Bankers said this would gradually lower the average cost of funding by the same amount, to the bank’s policy rate of 24%.
The steps came as investors weighed up Turkey’s banking watchdog decision to impose a one-day settlement delay for FX purchases of more than $100,000 by individuals. Bankers said that move could raise concerns about capital controls.
“The administration seems to be increasingly desperate to keep the lira stable at all costs ahead of the re-run of the crucial vote in Istanbul,” said Rabobank emerging markets forex strategist Piotr Matys, commenting on the forex purchases move.
“Instead of providing investors with a much needed assurance, such measures will have the opposite effect, as the market will interpret it as rising interference in the banking sector.”
The decision by election authorities to re-run the Istanbul mayoral vote has fueled concerns about an erosion of democracy and unnerved financial markets, helping push the lira down another 13% this year. The ruling AK Party’s narrow defeat in the initial election in March was the first time in 25 years that President Tayyip Erdogan’s party or its Islamist predecessors had lost control of Turkey’s biggest city.
Matys said the repo move was a contradictory measure at a time when Turkey needs to restore confidence in the lira.
“Such conflicting policies make Turkey increasingly unpredictable and keep the upside bias in USD/TRY intact,” he added, saying initial resistance was around 6.2282, with a break higher exposing the 6.46-6.50 area as the next potential target.
HIGH-FREQUENCY TRADERS TARGETED
A BDDK watchdog letter sent to banks on Monday said the settlement date for those purchases of more than $100,000 — or equivalent in other currencies — will be the following day.
“This one-day delay on FX transaction for retail investors is curious, especially when they take away the increase in rates in the morning,” said Charles Robertson, global chief economist at Renaissance Capital. “It’s a hint of capital controls, and the threat of more is implicit.”
Beste Naz Sullu, of Gedik Investment, said the BDDK was trying to curb foreign exchange speculation, but added that the market “does not like measures such as this much.”
The BDDK said on Tuesday the forex purchases move, effective from Tuesday, aimed to prevent “unnecessary and unjust harm” to the market, particularly by high-frequency traders.
Authorities have recently taken unorthodox steps to protect the currency, including state banks selling dollars. Ankara also raised a tax on some foreign exchange sales to 0.1% from zero last week to discourage Turks converting savings to foreign currencies.
Turks have flocked to foreign currencies in the months since last year’s crisis hit its peak in August, when the lira fell as much as 42% against the dollar.
The lira woes helped tip the economy into recession last year and Turkish Statistical Institute data on Tuesday showed consumer confidence tumbled to 55.3 points in May, the lowest level since the data was first published in 2004.
The main share index fell 1.26 percent.