Global Markets to Witness Major Investments from Middle Eastern Countries
By Bader AlAbdali
Gulf states foreign investments in capital markets to lead diversification in their source of income.
Saudi Arabia’s PIF target $1T in 2025 with majority of investments in the U.S. stock market.
Countries in the Middle East are witnessing a huge shift toward increasing their diversification in the source of income and reducing their reliance in the oil income they’ve been dependent on for the past 50 years. Government spending have been increasing since the emergence of COVID-19, which affected the basis of financial sustainability and expenditure control. To create new new sources of income with adjusted risk, Gulf states are in the process of increasing their foreign investments in countries such as the United States, United Kingdom and Germany.
Some of the Gulf states foreign investments performance of returns have topped the Sovereign Wealth Fund Institute peers. Kuwait’s Future Generations Fund (FGF) have grew by a tremendous 33% in 2021 which is currently valued at $172 billion making the FGF worth more than $700 billion*, making Kuwait’s Sovereign Wealth Fund the third largest fund in the world. Kuwait’s oil revenue from the past five years was around $250 billion. Abu Dhabi Investment Authority (ADIA), which is led by the government of the United Arab of Emirates, is valued at $690 billion. Saudi Arabia’s Public Investment Fund is valued at $430 billion and aims to reach $1 trillion by 2025.
The amount of publicly traded companies in global stock markets with Middle Eastern ties haven’t been increasing even though the oil-era generated a huge cash flow to Middle Eastern countries. On the other hand, governments of Middle Eastern countries control their oil production and their sales. Middle Eastern Sovereign Wealth Funds have been investing the excess of oil revenue returns into foreign capital markets.
Kuwait’s FGF is well known to be the oldest SWF in the world, established in 1976 and consists of investments in different asset classes such as securities, private equity, fixed income, infrastructure and real estate. About 50% of Kuwait’s FGF investments are in the United States. Kuwait’s FGF owns 5.25% of Blackrock Inc. (NYSE:BLK), a global investment manager company, along with other investments in trusts and funds managed by Blackrock. Kuwait Investment Authority’s FGF has been one of the largest and oldest shareholders of Daimler AG (DAI:DE), formerly Daimler-Benz with over 40 years. Daimler AG has been investing in other companies such as BAIC Motors with a 30% stake, and Renault with a 3.1% stake. Daimler AG owns an 11.8% stake in British sports car automaker Aston Martin Lagonda Global Holdings (LSE:AML).
One of the largest sovereign wealth funds; Qatar Investment Authority, have been a major pioneer in investing in the automotive industry, holding a substantial investments of 11.2% stake in Volkswagen AG (VOW3:DE). Saudi Arabia’s Ayar Third Investment, which is fully operated by the PIF and regulated by the U.S. Securities and Exchange Commission, owns a 62% stake in the EV automaker company Lucid Motors (NASDAQ:LCID), formerly known as Churchill Capital IV Corp prior to their merger through the special purpose acquisition company.
In February 2021, the Public Investment Fund of Saudi Arabia announced it acquired a large stake in the leading gaming and electronic companies listed in the U.S. stock market such as Activision Blizzard (NASDAQ:ATVI), Electronic Arts (NASDAQ:EA) and Take-two (NASDAQ:TTWO). These companies witnessed a $3.3 billion investment from the PIF. The Public Investment Fund increased its stake in these companies in August 2021, making it one of the largest single majority shareholders in these companies. PIF owns 4.3% of Activision Blizzard, 4.97% in Electronic Arts and 4.88% in Take-Two Interactive Software. Addionally, Saudi Arabia’s PIF owns 3.88% of Uber (NYSE:UBER).
In September 2020, Abu Dhabi Investment Authority acquired a 3.8% stake in Cheniere Energy (NYSE:LNG) making it the fifth largest share holder in the company. Cheniere Energy is the U.S. largest exporter of liquefied natural gas. The value of the acquired stake is around $615 million.
The MENA region is witnessing a huge revolutionary movement to enhance its economical, political and environmental position globally. Middle Eastern countries are establishing new future economical outlook such as Saudi Arabia’s 2030 vision, Kuwait’s vision of 2035, Qatar’s national vision of 2030 and the UAE’s vision of 2021. These plans indicate that global markets could witness new foreign investments from the Middle East in the near future.
