The Commission on securities and stock exchanges of the USA revealed information about obtaining a Sovereign Fund Saudi Arabia stocks of large U.S. companies in excess of $ 2.5 billion. The question arises — what this step means in the light of the austerity policies launched by the Kingdom to overcome the economic consequences of the pandemic coronavirus.
The image of Saudi Arabia in the United States began to crumble due to repeated attacks, the latest of which was the intention of the Saudi leadership to reduce the global rates, flooding the markets with oil, as Washington sees this as an attempt to bankrupt American companies, extracting shale oil.
As explained by Sharif Usman, an expert on financial and economic issues in the American company Analytica, in an interview with “al Jazeera”, the recent decision of Saudi Arabia speaks about the desire to take advantage of investment opportunities in a pandemic of coronavirus. As you know, the current crisis has led to a decrease in the value stocks of large U.S. companies.
According to American data, the Sovereign wealth Fund of Saudi Arabia acquired a stake in 713,7 million dollars in Boeing Company. At Citigroup he put 522 million dollars, the same to Facebook and 495,8 million in Disney and 487,6 million dollars in Bank of America.
It is worth noting that Sovereign Fund Saudi Arabia managing assets worth more than $ 300 billion.
Us stocks fall in price
In recent weeks, the shares of these companies have become dramatically cheaper, which was caused by the impact of the economic downturn in the United States. This decline was accompanied by an increase in unemployment: the number of unemployed increased by more than 35 million people. According to some experts, this economic crisis the United States has not seen since the great depression in the 1930s.
The share price of companies in which Saudi Arabia invested over the last six months declined as follows: Boeing shares fell from 369 USD for November 18, 2019 to 133 dollars on may 18, Citibank shares fell from $ 74, while shares of Bank of America from 32 to 22 dollars, while Disney shares fell from 147 to 116 dollars for the same period.
According to Usman, the current conditions encourage investors to buy more, especially in connection with a reduction in the value of shares of these companies, but what is surprising in this situation is the decision of the Sovereign Fund Saudi Arabia to acquire these shares, because Riyadh pursued a policy of austerity due to the low cost of oil and impact of the pandemic coronavirus.
As the expert noted, previously, Saudi Arabia in a similar way used the financial crisis of 2007 and 2008, when Prince al-Waleed bin Talal acquired a large stake in Citigroup. According to some specialists, this decision was made under severe pressure for the sake of the old American Bank from collapse.
Savings and investments
The Minister of Finance of Saudi Arabia Mohammed bin Abdullah al-Jadaan told about the intention of his country to make the difficult but necessary measures to protect the economy of Saudi Arabia and maintain the financial stability of the Kingdom.
The Saudi Minister confirmed that his country suffered simultaneously from three events, the first of which is the decline in world oil demand as a result of economic downturn, second the decline in non-oil revenues of the Kingdom as a result of termination of economic activities in the country and, finally, the third is the increase in unplanned expenditures to support the health sector to fight the epidemic of the virus.
In this regard, the American diplomat, retired, worked in a number of Gulf countries, said: “These costs and the infusion of millions of dollars in the American economy due to political considerations, not financial gain”.
“In the us capital, there are doubts about the economic plans of the Saudi crown Prince, known as “Vision 2030″, and these purchases can be a sort of message to get the trust of American investors,” said the diplomat, who declined to give his name.
Buying shares of U.S. companies, the perfect Sovereign wealth Fund of Saudi Arabia, was accompanied by the publication of the U.S. Treasury two days ago. The latter, to reduce the volume of Saudi investments in American securities to 159 billion dollars, compared with 184,4 billion at the end of February.
According to American diplomat, the image of Saudi Arabia was damaged due to the effects of its oil war with Russia, which caused the loss of tens of thousands of American workers and angered the administration of President Donald trump and members of Congress.
“In this regard, I consider the Saudi move as a modest attempt to improve its image in U.S. political circles”, — he said.