Saudi Arabia’s New Investments

Buying Stakes in US Companies

As the global economy reels from coronavirus fallout, Saudi Arabia’s sovereign-wealth fund is investing billions into US companies. The $300 billion fund is looking for bargains and is snapping up minority stakes in a number of American companies including Disney (DIS), Marriott (MAR), Bank of America Corp (BAC), Boeing (B), and others.

These deals follow an announcement last month that the Saudi Arabian Public Investment Fund, or PIF as its known, had amassed an almost $500 million stake in the struggling cruise line Carnival Corp. (CCL) and in the concert and event company, Live Nation Entertainment Inc. (LYV).

Diversifying Away From Oil

Since 2015, Crown Prince Mohammed bin Salman has been steering the fund toward industries unrelated to oil in an attempt to diversify the Saudi economy. Before coronavirus, Saudi Arabia was working on becoming a tourist destination and investing in other industries in the country that would create jobs that were not correlated to the oil industry.

This recent investment spree diversifies the country’s holdings at a time when oil prices have been volatile. Turmoil in the oil markets has put the country in a difficult position. Last week the government cut state employees’ subsidies and tripled its value-added tax rate.

Hope for the Oil Industry

The past months have been tumultuous for the oil industry. Saudi Arabia and Russia waged a price war and coronavirus sapped demand for the commodity. However, crude prices hit a two-month peak on Monday. This is likely a result of production cuts and investors hoping that as lockdowns ease, demand for oil will tick back up.

The industry’s future, as well as the future of Saudi Arabia’s new investments remains uncertain, but as lockdowns ease, glimmers of hope are emerging in the oil industry and other sectors.

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