Sov­er­eign fund up amid tur­moil

‘Due process’

Arab Times - - FRONT PAGE -

DUBAI, Nov 14, (RTRS): As Saudi Ara­bia’s anti-cor­rup­tion purge sends the shares of some if its com­pa­nies into a tail­spin, the kingdom’s sov­er­eign wealth fund has gained in value.

Last week the mar­ket value of the Pub­lic In­vest­ment Fund’s port­fo­lio of Saudi eq­ui­ties jumped by al­most $3 bil­lion, Reuters cal­cu­la­tions show, even as the ar­rest or ques­tion­ing of more than 200 peo­ple in the probe caused stocks in many pri­vately con­trolled firms to slump.

The share price of Na­tional Com­mer­cial Bank, for ex­am­ple, surged 8.7 per­cent; Saudi Ara­bian Min­ing Co gained 4.7 per­cent. They and the re­main­der of the PIF’s top 10 hold­ings rose, while the main stock mar­ket in­dex moved side­ways.

Some fund man­agers said gov­ern­ment-linked funds — pos­si­bly the PIF it­self — bought stocks in order to sup­port the mar­ket and avert panic. The PIF did not re­spond to a re­quest for com­ment on its mar­ket ac­tiv­ity.

In ad­di­tion, the man­agers added, money poured into PIFre­lated shares from other parts of the stock mar­ket as in­vestors de­cided the fund was the safest bet, a sign of its grow­ing im­por­tance in the Saudi econ­omy.

“It is al­ready ar­guably the coun­try’s most im­por­tant in­vestor in so many as­pects of the econ­omy, from bank­ing to trans­port,” said Sam Blat­teis, chief ex­ec­u­tive of re­gional ad­vi­sory firm The MENA Cat­a­lysts.

“As a con­se­quence of what’s hap­pen­ing, they may ac­cel­er­ate what they’ve been do­ing.”

For most of its life, the PIF, es­tab­lished in 1971, was a low-key in­sti­tu­tion mak­ing low-in­ter­est, low-risk loans to in­dus­tries which Riyadh wanted to de­velop.

That has changed un­der Crown Prince Mohammed bin Sal­man, ar­chi­tect of eco­nomic re­forms de­signed to help Saudi Ara­bia escape its de­pen­dence on oil ex­ports.

In the past two years he handed the PIF new re­spon­si­bil­i­ties, in­clud­ing de­vel­op­ing de­fence and tourism, un­der­tak­ing huge real es­tate projects, cre­at­ing a $500 bil­lion busi­ness zone and rais­ing re­turns on Saudi state money in­vested abroad.

With as­sets over $220 bil­lion — some $100 bil­lion of that in stakes in nearly two dozen listed Saudi firms — the PIF has said it aims to hit $400 bil­lion in as­sets by 2020, partly by ob­tain­ing money from a planned sale of shares in na­tional oil gi­ant Saudi Aramco.

The anti-graft probe may ac­cel­er­ate that growth, say bankers, lawyers and an­a­lysts fa­mil­iar with the PIF.

One of Prince Mohammed’s top plan­ners, econ­omy min­is­ter Adel Fakieh, was sacked and de­tained in the purge. That left PIF man­ag­ing di­rec­tor Yasir al-Ru­mayyan as one of only a few top ad­vis­ers in­volved in the re­form project since the be­gin­ning.

And for in­vestors keen to push ahead with Saudi projects de­spite the un­cer­tainty, the PIF and its sta­ble of firms look safer than most al­ter­na­tives, said a cor­po­rate lawyer based in the Gulf who ad­vises for­eign com­pa­nies en­ter­ing Saudi Ara­bia.

That said, the over­all im­pact of the anti-cor­rup­tion crack­down could be to de­ter in­vest­ment.

Alarmed by the scope of the crack­down, multi­na­tion­als and banks do­ing busi­ness in Saudi Ara­bia are de­cid­ing whether they can safely keep their ties to part­ners in the kingdom, cor­po­rate ex­ec­u­tives, bankers, lawyers and busi­ness con­sul­tants in the re­gion said.

Some de­ci­sions on new for­eign in­vest­ments have been sus­pended un­til the sit­u­a­tion be­comes clearer, the sources added.

A busi­ness­man at a for­eign tech­nol­ogy ser­vices firm said he had been con­sid­er­ing a ven­ture with a Saudi part­ner, but de­cided against it last week be­cause of the part­ner’s ties to de­tained con­struc­tion mag­nate Bakr bin Laden.

“This may con­cen­trate more power into the PIF be­cause they are seen as a clean en­tity close to the ruler,” said the Gulf-based cor­po­rate lawyer. “That makes them un­touch­able.”

Due process

Saudi royal fam­ily mem­bers, of­fi­cials and busi­ness­men ar­rested in an anti-cor­rup­tion crack­down this month will be granted due process, Saudi Ara­bia’s UN Am­bas­sador Ab­dal­lah Al-Moual­limi said on Mon­day.

“I can as­sure you there will be due process for any­body who is de­tained,” Al-Moual­limi told re­porters at the United Na­tions.

When asked how many peo­ple had been de­tained, he said: “I do not have a fig­ure to share with you. This is some­thing that the se­cu­rity au­thor­i­ties will an­nounce in due course.”

US Pres­i­dent Don­ald Trump has en­dorsed the crack­down, say­ing some of those ar­rested have been “milk­ing” Saudi Ara­bia for years, though the State Depart­ment has urged Riyadh to carry out pros­e­cu­tions in a “fair and trans­par­ent” man­ner.

Hu­man Rights Watch has also called on Saudi au­thor­i­ties to “im­me­di­ately re­veal the le­gal and ev­i­den­tiary ba­sis for each per­son’s de­ten­tion and make cer­tain that each per­son de­tained can ex­er­cise their due process rights”.

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