The government of Crown Prince Mohammed bin Salman has spent billions to counter selloffs in recent months
Saudi Arabia’s government has been spending billions of dollars to quietly prop up its stock market and counter selloffs that have followed repeated political crises in recent months.
According to a Wall Street Journal analysis of trading data and interviews with multiple people with direct knowledge of government intervention efforts, the Saudi government has placed huge buy orders, often in the closing minutes of negative trading days, to boost the market.
The Saudi stock market is a pillar of Crown Prince Mohammed bin Salman’s plan to revamp his country’s economy. Since he ascended to a top leadership position three years ago, the de facto Saudi ruler and his deputies have faced a series of foreign-relations predicaments—most recently the October murder of columnist Jamal Khashoggi—that prompted investors to dump Saudi stocks.
The Saudi stock exchange normally discloses how much stock the government buys. The recent purchases after political crises have been concealed from public view. That is because the government, rather than buying stock directly, has routed its money through asset managers at Saudi financial institutions who run funds that don’t need to reveal their clients, those people say.
.. It is a strategy the kingdom used last year after it launched an economic blockade of Qatar, following the arrest and torture of prominent Saudis, a corruption crackdown that some inside the government called a political purge, and after Prince Mohammed detained Lebanon’s prime minister, the Journal found.
Through the upheaval, Prince Mohammed’s government has been keen to show the world that Saudi Arabia remains safe for foreign investors. “We need to highlight to the world that Saudi investment is good,” said a Saudi government official.
.. China and other developing countries have been intervening for years in their stock markets. The Saudi efforts stand apart because they’re geared to attract foreign investors to a market with little foreign ownership. Foreigners only own about 4% of stock on the Saudi market, where all of the companies are Saudi-based and many have some government ownership.
.. Antoine van Agtmael, who coined the term “emerging market” almost 40 years ago, and who now works as an adviser for publisher FP Group, said government intervention makes the Saudi stock exchange “more of a fake market, and that kind of undermines the trust of investors in the long run.”
.. Having a healthy stock market is especially important because the Saudi stock exchange, known as the Tadawul, will be included next year in global emerging-market indexes. That inclusion will result in billions of dollars of foreign capital entering the exchange, which currently has a market capitalization of around $500 billion.
.. To prop up the market, the government has bought stocks via its sovereign Public Investment Fund, or PIF, say people familiar with the matter. PIF has been Prince Mohammed’s main investment instrument at home and abroad, taking a high-profile stake in Uber Technologies Inc. and investing billions of dollars with SoftBank Group Corp.
.. When local share prices falter, one of these people says, Mr. Rumayyan tells deputies to start buying. They use the messaging program WhatsApp to contact managers at institutions including state-controlled NCB Capital Co. who manage PIF funds, this person says.
Trump Is Gripped by Market Volatility—And His Role in It
As the stock market churned this week, President Trump anxiously called advisers both inside and outside the White House looking for validation that his talks with China were not driving the sell-off.
Trump has questioned why the markets weren’t reacting more positively to the news of his potential breakthrough with Beijing. In consulting with advisers, he remained convinced that the volatility wasn’t his own doing, but rather, the product of the Federal Reserve’s plan to raise the benchmark interest rate.
.. But investors—and many within his administration—saw it differently. Almost as soon as Mr. Trump declared himself “Tariff Man” on Twitter on Tuesday, indicating that he would be willing to slap additional tariffs on China if it doesn’t deliver on key promises, stock prices tumbled. Those concerns intensified Thursdayfollowing the arrest of a senior executive of networking-gear making Huawei Technologies Co., sending stocks plummeting for the greater part of the day.
Publicly, Mr. Trump has often dismissed market fluctuations as part of a natural correction, but several people close to the president say he places as much importance on the health of the Dow Jones Industrial Average for validation of his job performance as he does with his polling numbers.
.. He would get excited about triple-digit gains in a single day and question aides about how certain actions might influence the market, people familiar with the matter said. Asked about Mr. Trump’s attention to the stock market, one person close to the White House said: “He’s glued to it.”
.. Late last year, as stocks climbed to records, Mr. Trump repeatedly drew parallels between his administration’s economic policies and the market value of American companies, tweeting more than a dozen times about market performance in November and December 2017 alone... “It doesn’t seem like anything was actually agreed to at the dinner [at the G-20 in Buenos Aires] and White House officials are contorting themselves into pretzels to reconcile Trump’s tweets (which seem if not completely fabricated then grossly exaggerated) with reality,”JP Morgan wrote.. While he has been quick to claim credit for market rallies, Mr. Trump has repeatedly pointed elsewhere when stocks slide. His favorite target: Fed Chairman Jerome Powell, who Mr. Trump has slammed over his decision to raise the interest rate... Mr. Trump also said that the October sell-off was reaction to potential election wins by the Democratic party.. Treasury Secretary Steven Mnuchin, speaking at The Wall Street Journal CEO Council in Washington on Tuesday, acknowledged that “the (stock) market is now in a wait and see” moment with regard to China: “Is there going to be a real deal at the end of 90 days or not?”
Do Spectacular Earnings Justify Spectacular US Stock Prices?
With share prices and corporate earnings moving together on a nearly one-for-one basis, one might conclude that the US stock market is behaving sensibly, simply reflecting the US economy’s growing strength. But the stock market has not always been so dismissive of the volatility of earnings.
A Post-Trump World?
Yet what might happen should Trump be removed from office, either by impeachment leading to conviction or resignation or by federal indictment from Robert Mueller?
Given the evidence so far, the results could be civil chaos, and for a variety of reasons:
.. we have never threatened any president with impeachment primarily for purported wrongdoing before he took office... Had we done so, every president from Dwight Eisenhower (who avoided $400,000 in taxes by finagling a one-time government ruling to declare the huge royalties on his memoir as “capital gains” rather than income) to Barack Obama (who, well aside from Tony Rezko’s “gift,” faced campaign violations involving nearly $1.8 million in improper 2008 contributions that earned a $375,000 fine) would have faced non-stop legal hounding while in office. Harry Truman would have been impeached his first year, had a special prosecutor reviewed his long relationships of years past with the criminal syndicate run by Kansas City political boss Tom Pendergast. In 1963, a Mueller-like special counsel would still have been ferreting out all the election tampering during the 1960 election and its relationship to JFK... none of which justifies the allegations that he has committed high crimes and misdemeanors while in office.
.. on social issues or religious agendas, they might find Pence more unpalatable — and yet far harder to defame.
.. Nonetheless, do not expect the Left to cease its hysteria should Trump disappear; it would simply recalibrate and refocus on Pence. The effort would be to repeat the Trump-demonization formula of trying to leverage some sort of legal infraction into a melodramatic felony to discredit an opposition president — perhaps in the manner the Left is now seeking to turn the upright Brett Kavanaugh into a veritable monster. Getting Trump would likely only whet the appetite to go after his successor.
.. The base not only has little allegiance to the Wall Street/Chamber of Commerce view of the world on trade, immigration, and manufacturing, but could either sit out or oppose any election that returns the party to the orthodox ideology of the recent past.
The Trump base will see a Trump removal as a Deep State/elite-bluestocking effort to nullify an election. With long memories, they will be far less likely to vote Republican at the national level. We should remember that conservatives have maligned Trump voters as much as has the Left, from “crazies” to what Eliot Cohen recently referred to as a “peasant revolt.”
.. The base not only has little allegiance to the Wall Street/Chamber of Commerce view of the world on trade, immigration, and manufacturing, but could either sit out or oppose any election that returns the party to the orthodox ideology of the recent past.
The Trump base will see a Trump removal as a Deep State/elite-bluestocking effort to nullify an election. With long memories, they will be far less likely to vote Republican at the national level. We should remember that conservatives have maligned Trump voters as much as has the Left, from “crazies” to what Eliot Cohen recently referred to as a “peasant revolt.”
.. A Trump abdication of some sort would alienate current Trump voters from the Republican party for a generation.