Receive free Saudi Arabia updates
We’ll send you a myFT Daily Digest email rounding up the latest Saudi Arabia news every morning.
Saudi Arabia sold down its holdings of US Treasuries in June to the lowest in more than six years, as the kingdom directs more funds to foreign equity and domestic investments.
The kingdom held $108.1bn of Treasury securities in June, down $3.2bn from May and below the $119.7bn it held at the end of last year, according to data from the US Treasury department.
The reduction, the third consecutive monthly drop, comes as the world’s largest oil exporter faces lower economic growth this year due to a fall in oil prices from last year’s highs and a cut in its production.
The country has been ploughing money into investments aimed at diversifying its economy beyond oil revenues. It had funnelled a surplus last year into its $650bn sovereign Public Investment Fund, which has invested in recent years in football, golf and the ride-hailing service Uber while setting up companies in the kingdom to kick-start industries such as electric vehicle manufacturing and tourism.
“Historically Saudi Arabia used to keep most of its reserves in US Treasuries but now with the PIF and [its diversification agenda] Vision 2030 they’ve got a much greater investment diversification strategy,” said Monica Malik, chief economist at Abu Dhabi Commercial Bank.
“Some of the oil revenues are being directed domestically to investment programmes, but they’re also looking at different asset classes,” she said.
Treasuries have sold off in recent months as investors have bet on interest rates staying higher for longer and a softer landing for the US economy. The yield on the benchmark 10-year government bond has risen from 3.35 per cent in early May to 4.20 per cent on Wednesday.
The wealth fund, which is chaired by Saudi crown prince Mohammed bin Salman, the kingdom’s day-to-day ruler, reinvented itself in 2015 to make investments with higher potential rewards and risks. It put $45bn into SoftBank’s Vision Fund and bought billions of dollars in equities during the coronavirus pandemic market sell-off.
Finance minister Mohammed Al-Jadaan told the Financial Times last year that the country’s surplus would go into accelerating the diversification plan, which includes a planned $500bn megacity called Neom, tourism resorts and an electric vehicle manufacturing hub led by the Saudi-majority owned Lucid Group and a domestic PIF company, Ceer.
He said surplus revenue would go into reserves, the PIF and the National Development Fund, another state entity that supports private sector investments.
Saudi’s sale of US Treasuries comes as some other countries also reduce their holdings, most notably China, which owned $835bn in June, down $32bn from the end of last year.
