SoftBank tipped for $25bn KSA investment in ‘unique’ deal

SoftBank plans to deploy up to $15 billion in the new high-tech city of NEOM. (Reuters)
Updated 16 November 2017
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SoftBank tipped for $25bn KSA investment in ‘unique’ deal

LONDON: SoftBank’s reported plan to invest $25 billion in Saudi Arabia would be a “unique” move, a Riyadh-based economist has said.
The Japanese group, which is headed by Masayoshi Son, plans to invest the funds in Saudi Arabia over the next three to four years, Bloomberg reported on Wednesday, citing people familiar with the matter.
SoftBank plans to deploy up to $15 billion in the new high-tech city of Neom, with its $100 billion Vision Fund planning an investment of as much as $10 billion in Saudi Electricity, Bloomberg reported.
John Sfakianakis, director of economic research at the Gulf Research Center in Riyadh, said the reported investment would be “unique” as KSA is a co-investor in the Vision Fund.
“Here we have some of the money that Saudi Arabia invested in Vision finding its way back to the donor country, helping the Kingdom to invest in key evolving technologies, and boosting the economy overall,” said Sfakianakis.
The move would be part and parcel of what SoftBank indicated at last month’s Future Investment Initiative in Riyadh, added Sfakianakis.
SoftBank representatives made it clear then that they wanted to reinvest money from the Vision Fund into KSA, as the country looks to diversify its economy and reduce its dependence on oil, he said.
At the same time, the Vision Fund’s investment philosophy underlines Son’s belief in a future that he believes will be dominated by robotics and artificial intelligence.
Its investments so far have spanned robotics software start-ups like Brain Corp. and business software maker Slack. SoftBank has also been involved in a plan to buy a fifth of the existing stock of Uber — the company that has disrupted the transportation industry. With plans for Neom to be at the forefront of robotics and AI, the planned $500 billion megacity is an an obvious target for Son and SoftBank, said Sfakianakis.
Besides SoftBank and the Saudi wealth fund, investors in the Vision Fund include the sovereign wealth fund of Abu Dhabi, Apple and Foxconn. The Vision Fund announced in May it had raised over $93 billion from investors to fund ventures in areas such as AI and robotics.
Saudi Arabia previously announced plans to sell a large minority stake in Saudi Electricity to the Vision Fund but the figures have not been made public.
SoftBank did not respond to a request for comment on the Bloomberg report. Representatives of Saudi Arabia’s Public Investment Fund (PIF), the investor in the Vision Fund, did not provide a comment.


As worries about populism in Europe rise, investors bet on stock market volatility

Updated 39 min 50 sec ago
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As worries about populism in Europe rise, investors bet on stock market volatility

  • More than 350 million EU citizens will head to the polls between May 23 and 26 to elect a new Parliament
  • The vote will shape the future of the bloc amid a backlash against immigration and years of austerity

LONDON: Investors are betting on heightened political uncertainty and greater volatility in European stock markets ahead of European Parliament elections in May amid growing concerns about rising populism.
In one of the first concrete signs in financial markets that investors are bracing for political instability, VSTOXX futures , which reflect investor sentiment and economic uncertainty, have jumped in recent weeks.
While the classic gauge of fear — known as implied volatility, which tracks demand for options in European stocks — is currently at 15.68, futures that bet on the same thing over the coming months show a pronounced jump.
That’s because investors have piled on trades that bet on big swings in stocks as election day nears.
Implied volatility for futures contracts expiring in May show a pronounced jump to 16.8, compared with 15.35 in April. The contracts measure the 30-day implied volatility of the euro zone STOXX 50 index.
“We are seeing a bit of a kink around May when we have European elections and we have this wave of populism,” said Edmund Shing, head of equities and derivatives strategy at BNP Paribas.

Looming elections
More than 350 million EU citizens will head to the polls between May 23 and 26 to elect a new Parliament, a vote that will shape the future of the bloc amid a backlash against immigration and years of austerity.
Mainstream center-left and center-right lawmakers may lose control of the legislature for the first time, as euroskeptic and far-right candidates build support.
Herve Guyon, Societe Generale’s head of European equity derivatives flow strategy and solutions, said the rise of populism had triggered a recent flurry of speculative trades.
“Political uncertainty might be coming from the EU rather than the United States. We’ve seen investors doing very large trades to benefit from an increase in volatility around these events,” he said.
“We as a bank don’t expect the elections to be a massive game-changer. The populists won’t get enough to disrupt the political system, but we do note some investors did take some positions on this event.”
The implied volatility is still well below levels seen in late 2018 when global stock markets were routed amid worries about rising interest rates, slowing economic growth and the trade war between Beijing and Washington.
In late December, it shot to above 26, its highest since February.
But the flurry of activity suggests investors are seeking out new opportunities after a slide in implied volatility across major asset classes.
Edward Park, deputy chief investment officer at asset manager Brooks MacDonald, said some of the activity may also be due to persistent uncertainty about Britain’s exit from the European Union as the Brexit date of March 29 nears.
This year, volatility across currency, fixed income and stocks markets has plunged as the US Federal Reserve and European Central Bank have taken dovish policy stances.
The Deutsche Bank currency volatility indicator hit multi-year lows this week, while the proxy for fixed income volatility is languishing at all-time lows.
In stocks, the Cboe volatility index, Wall Street’s so-called “fear gauge,” fell to its weakest in six months this week.
“There’s been a cross-asset volatility crash — in euro-dollar, US rates and equities — in the aftermath of (ECB President Mario) Draghi’s and (Fed Chairman Jerome) Powell’s comments and the expectation of lower rates for longer,” said Guyon.