Saudi Arabia buys $7.7 billion shares in world’s best known companies

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Boeing is the among the global corporate leaders that Saudi Arabia's Public Investment Fund has included as it goes bargain hunting during the current coronavirus pandemic. (AFP)
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Facebook is the among the global corporate leaders that Saudi Arabia's Public Investment Fund has included as it goes bargain hunting during the current coronavirus pandemic. (Reuters)
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Updated 19 May 2020

Saudi Arabia buys $7.7 billion shares in world’s best known companies

  • Bargain-hunting wealth fund invests in Boeing, Facebook, Disney, Starbucks and more

DUBAI: Saudi Arabia’s sovereign wealth fund has gone bargain hunting during the current economic turmoil, snapping up about $7.7 billion worth of shares in some of the best known companies in the world.

The $300 billion Public Investment Fund bought stakes in global corporate leaders such as Boeing, Facebook, Disney, Marriott and Starbucks. It also invested in two big US banks, Citigroup and Bank of America, and took holdings in oil giants BP, Total and Royal Dutch Shell.

Stock market experts said the buying spree reflected confidence on the part of the PIF that companies badly affected by the economic fallout from the COVID-19 pandemic would recover quickly, and their share prices would rise.

“The PIF seems to have taken a view on prices from a long-term perspective. We must assume they bought when they were down on the assumption they’ll go back up,” Tarek Fadlallah, chief executive of Nomura Asset Management in the Middle East, told Arab News.

Explaining its investment rationale, the PIF described itself as “a patient investor with a long-term horizon. As such, we actively seek strategic opportunities both in Saudi Arabia and globally that have strong potential to generate significant long-term returns while further benefiting the people of Saudi Arabia and driving the country’s economic growth.”

FASTFACTS

  • The buying spree reflects confidence on the part of the PIF that companies badly hit by the pandemic would recover quickly, say experts.
  • US stocks lost about 30 per cent of their value in the crash after the global lockdowns began, but have since recovered about half of that decline.

A declaration to the US stock market regulator showed PIF having positions worth about $10 billion in 24 companies. The biggest, worth just over $2 billion, was an already declared holding in taxi app Uber.

The next biggest was an investment in BP,  nearly 34 million shares valued at $827 million, followed by the Boeing stake for $713 million. Facebook and Citigroup stakes were valued at about $521 million each.

The new PIF portfolio has a strong bias toward travel, entertainment and hospitality, with shareholdings in the Marriott hotel chain, the online travel company Booking.com and events promoter Live Nation.

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There is also interest in technology with investments in Cisco, Qualcomm and Broadcom, and in pharmaceuticals via a stake in Pfizer.

One notable smaller purchase was in Berkshire Hathaway, the vehicle of legendary investor Warren Buffet, who recently sold big stakes on a pessimistic view of future valuations. One Saudi banker said: “That’s a cheeky way of PIF telling Buffet that they are more optimistic than him.”

US stocks lost about 30 per cent of their value in the crash after the global lockdowns began, but have since recovered about half of that decline after large-scale fiscal intervention by the federal authorities.


EU pledges to stay green in virus recovery

Updated 29 May 2020

EU pledges to stay green in virus recovery

  • To help economies from the 27-nation bloc bounce back as quick as possible

BRUSSELS: The European Commission pledged on Thursday to stay away from fossil-fueled projects in its coronavirus recovery strategy, and to stick to its target of making Europe the first climate neutral continent by the middle of the century, but environmental groups said they were unimpressed.

To weather the deep recession triggered by the pandemic, Commission President Ursula von der Leyen has proposed a €1.85 trillion ($2 trillion) package consisting of a revised long-term budget and a recovery fund, with 25 percent of the funding set aside for climate action.

To help economies from the 27-nation bloc bounce back as quick as possible, the EU’s executive arm wants to increase a €7.5-billion ($8.25 billion) fund presented earlier this year that was part of an investment plan aiming at making the continent more environmentally friendly.

Under the commission’s new plan, which requires the approval of member states, the mechanism will be expanded to €40 billion ($44 billion) and is expected to generate another €150 billion in public and private investment. The money is designed to help coal-dependent countries weather the costs of moving away from fossil fuels.

Environmental group WWF acknowledged the commission’s efforts but expressed fears the money could go to “harmful activities such as fossil fuels or building new airports and motorways.”

“It can’t be used to move from coal to coal,” Frans Timmermans, the commission executive vice president in charge the European Green Deal, responded on Thursday. “It is unthinkable that support will be given to go from coal to coal. That is how we are going to approach the issue. That’s the only way you can ensure you actually do not harm.”

Timmermans conceded, however, that projects involving fossil fuels could sometimes be necessary, especially the use of natural gas to help move away from coal.

The commission also wants to dedicate an extra €15 billion ($16.5 billion) to an agricultural fund supporting rural areas in their transition toward a greener model.

Von der Leyen, who took office last year, has made the fight against climate change the priority of her term. Timmermans insisted that her goal to make Europe the world’s first carbon-neutral continent by 2050 remained unchanged, confirming that upgraded targets for the 2030 horizon would be presented by September.

Reacting to the executive arm’s recovery plans, Greenpeace lashed out at a project it described as “contradictory at best and damaging at worst,” accusing the commission of sticking to a growth-driven mentality detrimental to the environment.

“The plan includes several eye-catching green `options,’ including home renovation schemes, taxes on single-use plastic waste and the revenues of digital giants like Google and Facebook. But it does not solve the problem of existing support for gas, oil, coal, and industrial farming — some of the main drivers of a mounting climate and environmental emergency,” Greenpeace said.

“The plan also fails to set strict social or green conditions on access to funding for polluters like airlines or carmakers.”

Timmermans said the EU would keep investing in the development of emission-free public transportation, and promoting clean private transport through the EU budget.