(Changes description of The MENA Catalysts to “regional advisory firm”, from “regional business advisory firm” in sixth paragraph)
* Public Investment Fund’s portfolio rises during market turmoil
* Anti-corruption probe disrupting parts of private sector
* This leaves PIF as a key distributor of capital in economy
By Andrew Torchia and Saeed Azhar
DUBAI, Nov 13 (Reuters) - As Saudi Arabia’s anti-corruption purge sends the shares of some if its companies into a tailspin, the kingdom’s sovereign wealth fund has gained in value.
Last week the market value of the Public Investment Fund’s portfolio of Saudi equities jumped by almost $3 billion, Reuters calculations show, even as the arrest or questioning of more than 200 people in the probe caused stocks in many privately controlled firms to slump.
The share price of National Commercial Bank, for example, surged 8.7 percent; Saudi Arabian Mining Co gained 4.7 percent. They and the remainder of the PIF’s top 10 holdings rose, while the main stock market index moved sideways.
Some fund managers said government-linked funds - possibly the PIF itself - bought stocks in order to support the market and avert panic. The PIF did not respond to a request for comment on its market activity.
In addition, the managers added, money poured into PIF-related shares from other parts of the stock market as investors decided the fund was the safest bet, a sign of its growing importance in the Saudi economy.
“It is already arguably the country’s most important investor in so many aspects of the economy, from banking to transport,” said Sam Blatteis, chief executive of regional advisory firm The MENA Catalysts.
“As a consequence of what’s happening, they may accelerate what they’ve been doing.”
For most of its life, the PIF, established in 1971, was a low-key institution making low-interest, low-risk loans to industries which Riyadh wanted to develop.
That has changed under Crown Prince Mohammed bin Salman, architect of economic reforms designed to help Saudi Arabia escape its dependence on oil exports.
In the past two years he handed the PIF new responsibilities, including developing defence and tourism, undertaking huge real estate projects, creating a $500 billion business zone and raising returns on Saudi state money invested abroad.
With assets over $220 billion - some $100 billion of that in stakes in nearly two dozen listed Saudi firms - the PIF has said it aims to hit $400 billion in assets by 2020, partly by obtaining money from a planned sale of shares in national oil giant Saudi Aramco.
The anti-graft probe may accelerate that growth, say bankers, lawyers and analysts familiar with the PIF.
One of Prince Mohammed’s top planners, economy minister Adel Fakieh, was sacked and detained in the purge. That left PIF managing director Yasir al-Rumayyan as one of only a few top advisers involved in the reform project since the beginning.
And for investors keen to push ahead with Saudi projects despite the uncertainty, the PIF and its stable of firms look safer than most alternatives, said a corporate lawyer based in the Gulf who advises foreign companies entering Saudi Arabia.
That said, the overall impact of the anti-corruption crackdown could be to deter investment.
Alarmed by the scope of the crackdown, multinationals and banks doing business in Saudi Arabia are deciding whether they can safely keep their ties to partners in the kingdom, corporate executives, bankers, lawyers and business consultants in the region said.
Some decisions on new foreign investments have been suspended until the situation becomes clearer, the sources added.
A businessman at a foreign technology services firm said he had been considering a venture with a Saudi partner, but decided against it last week because of the partner’s ties to detained construction magnate Bakr bin Laden.
“This may concentrate more power into the PIF because they are seen as a clean entity close to the ruler,” said the Gulf-based corporate lawyer. “That makes them untouchable.” (Additional reporting by Katie Paul and Stephen Kalin in Riyadh, and Tom Arnold in Dubai)