Saudi Arabia’s holding of US bonds amounted to $127.3 billion in May
US market is dominant player for Saudi investors accounting for 98% of all foreign trades
Saudi Arabia’s holding of US Treasury securities amounted to $127.3 billion in May 2021, according to new data from the US government.
The amount was down 3 percent compared to April but up 3 percent compared to May 2020. This yearon-year increase is in line with global trends, as countries around the world increased their holdings by 2.25 percent in the year leading up to May 2021.
However, analysis showed that Saudi holdings are still down from their peak of $184.4 billion in February 2020. As the global pandemic took hold in March last year, the Saudi government decreased its holding by 25 percent and by a further 33.8 percent in April, as the Kingdom’s reserves were hit by the collapse in oil prices.
“The decrease in Saudi holdings of US treasuries follows the larger trend of the Kingdom drawing down its total foreign reserves to support the economy’s rebound in the wake of the pandemic. The economy has gradually rebounded since pandemic-induced restrictions limited commercial and consumer spending,” Albara’a Al-Wazir, an economist at the
US-Saudi Business Council, told Arab News. “The increase in spending has brought a surge in imports to accommodate growing demand. In order to finance the growth in imports, Saudi Arabia targeted its foreign reserves, as was recently stated by the Saudi Central Bank’s governor,” he added.
In August last year, Saudi Arabia began to boost its holdings once
again, peaking in November and then continuing to decline by low single percentages ever since.
“The rate of decline has recently slowed, with small additions depending on the vagaries of oil prices, which will continue to be the key parameter for either additions or drawdowns in the next few months. With oil prices forecast at around the $72-75 ranges, or even higher in the first quarter of 2022, there will be some expected Saudi T-bill additions,” Mohammed Ramady, a former professor of finance and economics at King Fahd University of Petroleum and Minerals, told Arab News.
The Kingdom is the 14th largest holder of US debt. Japan remains No.1 with $1266.2 billion in US bonds, followed by China ($1078.4 billion), the UK ($467.7 billion), Ireland ($304.9 billion) and Luxembourg ($287.6 billion).
The UAE holds $57.3 billion, an increase of nearly 100 percent yearon-year. Kuwait holds $45.9 billion, up just 5 percent year-on-year.
However, Al-Wazir pointed out that, overall, the Kingdom’s exposure to the US has actually increased. “While Saudi Arabia’s holding of long and short-term US treasuries has gradually declined since the fourth quarter of 2020, there has been a significant uptick in US corporate stock holdings. The US stock market post-pandemic boom created lucrative investment opportunities for the Kingdom, as it witnessed historical returns following the crash in March 2020.”
In fact, the total amount invested by Saudi traders in the US stock market through companies licensed by the Capital Market Authority (CMA) surged 162 percent yearon-year to SR77.4 billion ($20.64 billion) in the first quarter of 2021. Throughout the whole of last year, the amount was even higher, surging 606 percent year-on-year to SR323.365 billion.
When it comes to overseas trading, the US market is the dominant player for Saudi investors, accounting for 98 percent of all foreign trades authorized by the CMA.
At the same time, Saudi Arabia’s sovereign wealth fund — the Public Investment Fund (PIF) — increased its US stock holdings by around 20 percent quarter-on-quarter to $15.4 billion in the first quarter of 2021.
The PIF invested $141 million in e-commerce company Coupang and boosted its investments in American video game companies Activision Blizzard and Electronic Arts. The $400 billion fund’s biggest US stock holding was in ride-hailing app Uber. The PIF bought a $3.5 billion stake in Uber in 2016, which is now worth nearly $4 billion.