Saudi Arabia’s PIF open to more joint ventures with foreign partners

Exclusive: Listed companies from the fund's portfolio have a combined market capitalisation of $30.66 billion

The Riyadh skyline. Saudi Arabia is focused on diversifying its economy away from oil. Reuters
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Saudi Arabia’s Public Investment Fund is open to entering into more joint ventures with foreign companies looking to invest in the kingdom, an executive from the wealth fund has said.

This week, the PIF and South Korea’s Hyundai agreed to jointly build a car manufacturing plant in Saudi Arabia, with an estimated investment of more than $500 million.

“One of the main advantages of these kinds of joint venture partnerships is to localise the technical know-how, and this is one of the main things that we need to do,” said Abdulmajeed Alhagbani, head of Mena securities investments at the PIF.

“[South] Korea is … a major G20 country and, going forward, we are open to having this kind of exchange with all the countries,” he told The National on the sidelines of the Future Investment Initiative in Riyadh.

The PIF will hold a 70 per cent stake in the joint venture with Hyundai, which will own the remaining stake.

The plant, scheduled to begin production in 2026, aims to manufacture 50,000 vehicles a year, including internal combustion engine and electric-powered vehicles.

Saudi Arabia, the Arab world's largest economy, is focused on building its domestic EV market as part of its Vision 2030 strategy to diversify its economy away from oil.

The PIF has also formed a joint venture with Italian company Pirelli to build a tyre plant in the kingdom, with an estimated investment of about $550 million.

The wealth fund has listed several companies from its portfolio in recent years, driven by strong investor appetite.

Shares of Ades Holding, an oil and gas drilling company backed by the PIF, surged 30 per cent on its first day of trading on October 11 after raising $1.22 billion in an initial public offering last month.

“We [have] 'IPO-ed' in market cap more than 115 billion Saudi riyals ($30.66 billion),” Mr Alhagbani said.

Having currencies pegged to the US dollar is an “extreme advantage” for the GCC region because investors are looking for dollar-backed investments amid high interest rates, he said.

The US Dollar Index – a measure of the value of the greenback against a weighted basket of major currencies – has grown by more than 13 per cent over the past three years as geopolitical uncertainty drives investors to safe-haven assets.

Globally, in the first nine months, 968 IPOs raised $101.2 billion, a 5 per cent and 32 per cent decrease year on year, respectively, according to consultancy EY.

In the Europe, Middle East, India and Africa region, 286 IPOs raised $21.9 billion in the third quarter, an increase of 2 per cent in volume but a 44 per cent reduction in proceeds.

In the Mena region, the growth in listings is being driven by Saudi Arabia and the UAE, the top regional economies, EY said in an earlier report.

The PIF aims to double the size of its assets to $1 trillion by 2025 as it continues to increase investments to support the growth of Saudi Arabia's economy.

Responding to a query about geopolitical and economic challenges, Mr Alhagbani said that investors, in general, needed to focus on the long term.

“As part of the investing timeline, there are hiccups and there is peace and [economic] bottoms,” Mr Alhagbani said.

“We actually see these … economic factors that may impact our investment, but we take the right decisions [and] on [a] long term basis.”

Updated: October 29, 2023, 3:00 AM