S. Arabia may sell off Cdn. assets

As Saudi Arabia continues to escalate its political dispute with Canada, experts say Canadian businesses shouldn’t expect any quick resolution.

On Tuesday the loonie dipped following a report that Saudi Arabia had directed asset managers to sell off Canadian holdings.

The Saudi central bank and state pension funds have sent instructions to dispose of Canadian equities, bond, and cash “no matter the cost,” the Financial Times said, citing unnamed sources.

“The biggest effect it had immediately this morning was the Canadian dollar did take a drop, it fell about half a per cent today,” said Michael Currie, vice-president and investment analyst at TD Wealth.

“It’s strengthened since then, but I think a lot of that was a report on the Saudi central bank and pension funds are selling stocks, selling a lot of assets,” he said.

Saudi Arabia is estimated to hold between about $10 billion and $25 billion in Canadian currency, said Currie.

The report came a day after the Toronto Stock Market saw a major selloff from an unknown international dealer, in contrast to gains in other global markets, said Dominique Barker, portfolio manager, CIBC Asset Management.

The equities selloff came after Canada’s Global Affairs Ministry expressed concern about the arrest and detention of a female blogger and activist in Saudi Arabia, prompting the kingdom to respond forcefully.

Saudi Arabia has declared a freeze on new trade with Canada, recalled thousands of students attending Canadian universities, ordered Canada’s ambassador to leave the country, said it would pull all Saudi patients from Canadian hospitals, and suspend Canadian operations at their national airline starting Aug. 13.

Canadian grain exports to the country have also been hit, said Cam Dahl, president of industry group Cereals Canada.

“We do have notification from the Saudi grains organization that future contracts, they’re not going to be from Canada.”

He said about seven per cent of Canada’s barley crop goes to Saudi Arabia, while a much smaller share of wheat goes there.

The strong response from Saudi Arabia comes after the country was frustrated by debate in Canada on a $15-billion contract on light armoured vehicles with the kingdom and a lack of attention to business relations, said Janice Stein, founding director at the Munk School of Global Affairs.

“They expect attention to the relationship. From their perspective, public criticism of their human rights record is not consistent with developing a relationship with them.”