Saudi Ara­bia's sale of for­eign as­sets ac­cel­er­ates

The Pak Banker - - MARKETS/SPORTS -

Saudi Ara­bia's hold­ings of for­eign as­sets slid some $19.4 bil­lion last month, its largest one-month de­cline. As Mar­ket­field As­set Man­age­ment CEO Michael Shaoul says this re­duces its rolling 12 month hold­ings by $115.2 bil­lion, out­pac­ing Saudi Ara­bia's record pace of ac­cu­mu­la­tion in 2012. Cer­tainly, the de­cline has only put hold­ings back to their Au­gust 2012 lev­els, dou­ble 2007 lev­els, but Shaoul writes that the speed of the de­cline is mean­ing­ful, as it "in­di­cates a de­gree of duress."

More­over, this De­cem­ber data doesn't cover the lat­est oil sell­off. He said our con­cern is not whether Saudi Ara­bia can "af­ford" to run down its for­eign as­set hold­ings (it clearly can, since even the cur­rent pace could be ab­sorbed for two or three years and still leave a large re­serve hold­ing), but what the ef­fect of a $230 bln swing in its fund­ing po­si­tion since 2012 means for global as­set mar­kets given that it comes on top of a much larger swing by China.We view Saudi Ara­bia as the se­cond largest con­trib­u­tor to QT (Quan­ti­ta­tive Tight­en­ing - a cen­tral bank di­vest­ing as­sets) and we sus­pect that a good deal of the liq­ui­da­tion has taken place in ac­tual credit and equity mar­kets rather than in trea­suries (there is no trans­parency in the data so this is mere sup­po­si­tion on our part).

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