The Wall Street Journal has exposed Saudi Arabia's stock market rescue squad...
The Journal pulls no punches in turning the conspiracy theory into conspiracy fact, noting that the government of Crown Prince Mohammed bin Salman has spent billions to counter selloffs 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.
Most notably, while 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.
Through the upheaval, MbS' 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.
To prop up the market, the government has bought stocks via its sovereign Public Investment Fund, or PIF, say people familiar with the matter.
While the PIF’s recent stock purchases aren’t publicly disclosed, they’re openly discussed by Saudi traders.
“In the bad days of Saudi Arabia, when there are troubles related to government, you see these flows coming in,” said Abdullah al Marshad, a trader at Saudi Arabia’s Samba Financial Group.
“It tells people: Don’t worry.”
But, as Antoine van Agtmael, who coined the term "emerging market" almost 40 years ago, warns:
...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.”
But in the short-term, all that matters is a bull market and the financial projection of economic strength, and as details of Jamal Khashoggi's murder in a Saudi consulate building emerged, the Tadawul All Shares Index (TASI) experienced 10 volatile days of trading. The Tadawul entered its steepest decline of 2018: Share prices sank 5% between Oct. 10 and 11. People familiar with the matter say most of the buying came from the PIF.
Zoomed in the moves are all the more impressive and sudden. A selloff sent the market down about 2% on Oct. 22. In the 40 or so minutes before the market closed that day, heavy buying boosted it by more than 3%.
How is it done? Very simple - When local share prices falter, one of these people says, PIF chief Yasir al 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.
The Journal concludes that data and interviews show the government bolstered the market by buying about $2 billion in stock that week, but of course, local (and state-sponsored) media credited the crown prince's remarks for saving the world.
More at: https://www.zerohedge.com/news/2018-...n-team-exposed
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