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.


European bank ramps up stimulus package

Updated 05 June 2020

European bank ramps up stimulus package

FRANKFURT: The European Central Bank approved a bigger-than-expected expansion of its stimulus package on Thursday to prop up an economy plunged by the coronavirus pandemic into its worst recession since World War II.

Just months after a first raft of crisis measures, the ECB said it would raise bond purchases by €600 billion ($674 billion) to €1.35 trillion and that purchases would run at least until end-June 2021, six months longer than first planned.

It also said it would reinvest proceeds from maturing bonds in its pandemic emergency purchase scheme at least until the end of 2022.

ECB President Christine Lagarde scotched speculation that the bank could follow the US Federal Reserve in buying sub-investment grade bonds, saying that option was not discussed by policymakers.

The announcement, which comes just weeks after Germany’s Constitutional Court ruled that the ECB had already been exceeding its mandate with a longstanding asset purchase program, prompted a rally in the euro and bond markets.

“Today’s easing measures were another illustration that the ECB means business and stands ready to do whatever is necessary to help the euro area survive the corona crisis in one piece. The ECB will do its part, and it hopes the governments will do their part,” Nordea analysts said in a note.

The bank dramatically revised downward its baseline scenario for euro zone output this year to a contraction of 8.7 percent from the modest 0.8 percent rise it had forecast only in March.

“The euro area economy is experiencing an unprecedented contraction. There has been an abrupt drop in economic activity as a result of the coronavirus pandemic and the measures taken to contain it,” Lagarde said.

She said she was confident that a “good solution” could be found on the legal stand-off with Germany’s top court.