US, WASHINGTON (ORDO NEWS) — The Securities and Exchange Commission of the United States disclosed information on the acquisition by the Sovereign Fund of Saudi Arabia of shares of large American companies in an amount exceeding $ 2.5 billion. The question arises – what does this step mean in light of the austerity policies launched by the kingdom to overcome the economic consequences of the coronavirus pandemic, writes Al Jazeera.
The image of Saudi Arabia in the United States began to crumble as a result of repeated strikes, the last of which was the Saudi leadership’s intention to lower world prices by flooding markets with oil, as Washington sees this as an attempt to bankrupt U.S. shale oil companies.
As Sharif Usman, a financial and economic specialist at the American company Analytica, explained in an interview with Al-Jazeera, a recent decision by Saudi Arabia indicates a desire to take advantage of the investment opportunities that have emerged in the context of the coronavirus pandemic. As you know, the current crisis has led to a decrease in the value of shares of large American companies.
According to U.S. data, the Saudi Arabia Sovereign Fund acquired a share of $ 713.7 million from the Boeing Company. He invested $ 522 million in Citigroup, the same amount on Facebook, as well as $ 495.8 million in Disney and $ 487.6 million in Bank of America.
It is worth noting that the Saudi Arabia Sovereign Fund manages assets worth more than $ 300 billion.
US stocks fall in price
In recent weeks, the stocks of these companies have become sharply cheaper, due to the effects 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, the United States has not known such an economic crisis since the Great Depression in the 1930s.
The stock price of companies in which Saudi Arabia has invested over the past six months has declined as follows: Boeing shares fell from $ 369 on November 18, 2019 to $ 133 on May 18, Citibank fell from $ 74, and Bank of America from $ 32 to $ 22, while Disney shares fell from $ 147 to $ 116 in the same period.
According to Usman, the current conditions are encouraging investors to buy more, especially in connection with the decrease in the cost of shares of these companies, but what is surprising in this situation is the decision of the Saudi Arabia Sovereign Fund to purchase these shares, as Riyadh pursues austerity policy for the low cost of oil and the consequences of the coronavirus pandemic.
According to the expert, earlier Saudi Arabia similarly used the financial crisis of 2007 and 2008, when Prince Alwaleed bin Talal acquired a large stake in Citigroup. According to some experts, this decision was made under serious pressure to save the old American bank from collapse.
Savings and Investments
Saudi Minister of Finance Mohammed bin Abdullah al-Jadaan spoke about his country’s intention to take complex but necessary measures to protect the Saudi economy 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 a decrease in world oil demand as a result of the economic downturn, the second is the reduction of the kingdom’s non-oil revenues as a result of the cessation of economic activity in the country, and finally, the third is the increase in unplanned expenses for health sector support to tackle the virus epidemic.
In this regard, a retired American diplomat who worked in several Gulf countries noted: “These costs and the injection of millions of dollars into the American economy are due to political considerations, and not just financial gain.”
“In the American capital, there are big doubts about the economic plans of the Saudi Crown Prince, known as Vision 2030, and these purchases can be a kind of message to gain the confidence of American investors,” said the diplomat, who refused to give his name.
The purchase of shares in American companies by the Saudi Arabia Sovereign Fund was accompanied by the publication of US Treasury data two days ago. The latter indicates a decrease in Saudi investment in US securities to $ 159 billion, compared with $ 184.4 billion at the end of February.
According to the American diplomat, the image of Saudi Arabia was damaged due to the consequences of its oil war with Russia, which caused the loss of work of tens of thousands of American workers and angered the administration of President Donald Trump and members of Congress.
“In this regard, I regard the actions of Saudi Arabia as a modest attempt to improve its image in American political circles,” he said.
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