The Revival of Oil Money... Western Funds Running Dry Send Urgent SOS

'High Inflation Woes' Western Central Banks' Aggressive Tightening
Ukraine Sparks Oil & Gas Surge... Middle East Amasses Huge Wealth
Qatar's Large-Scale LNG Investment... Western Oil Firms Show Growing Interest
Saudi PIF Invests in Japan's Nintendo... Aston Martin Stake Negotiations

[Asia Economy Reporter Byunghee Park] Middle Eastern oil money is experiencing another heyday.

The Ukraine war has pushed up oil and natural gas prices, allowing Middle Eastern countries to accumulate enormous wealth. Meanwhile, the West is facing soaring inflation not seen in decades, leading central banks in various countries to implement strong tightening measures, drying up liquidity. As a result, fund managers worldwide are flocking to the Middle East. The Ukraine war is having opposite effects on the West and the Middle East, reversing the flow of funds in the global financial market.

◆ "Oil money attracts like a magnet" = The UK’s Financial Times recently reported that Middle Eastern oil money is attracting fund managers in the global asset management industry like a magnet. Mohamed Abkami, director of Magenta Capital Services based in Dubai, said, "Western fund officials have been visiting throughout this summer," calling it "an unprecedented event."

Sovereign wealth funds of Saudi Arabia, Kuwait, Qatar, and the United Arab Emirates (UAE) are currently regarded as the last bastion capable of providing funding. Middle Eastern countries are also actively seeking places to invest the wealth accumulated from energy. Abkami said Middle Eastern institutional investors have already increased their overseas investment assets by 30-50%.

Middle Eastern sovereign wealth funds have also increased investments in private equity, infrastructure, and real estate. Recently, with increased volatility in the global stock market, they are paying attention to alternative investment markets. Abkami predicted that Middle Eastern sovereign wealth funds will increase private asset investments by 30-50% over the next few years. The assets under management of Middle Eastern sovereign wealth funds amount to $3-4 trillion.

Investment firms are entering the Middle East one after another, following the money. In February, US hedge fund Apollo Capital Management agreed to strengthen its collaboration with Mubadala, the sovereign wealth fund of Abu Dhabi, UAE.

Franklin Templeton is searching for office space in Saudi Arabia. According to an anonymous source, Jenny Johnson, CEO of Franklin Templeton, has identified Saudi Arabia as an important market for expanding its asset management business. Franklin Templeton entered the Middle East 20 years ago and established a base in Dubai but plans to develop Riyadh as a key hub in the future. Franklin Templeton manages assets worth $1.5 trillion.

◆ Murdoch’s second son attracts investment from Qatar = Atlas Merchant Capital, an investment company co-founded in 2013 by Bob Diamond, former CEO of Barclays, secured $100 million in investment from the Qatar Financial Centre (QFC) at the end of last month. QFC is a government agency established by the Qatari government with the ambition to become a financial hub.

In February, Qatar agreed to invest up to $1.5 billion in a media venture company established in India by James Murdoch, the second son of media mogul Rupert Murdoch.

The reason Qatar has recently shown remarkable investment activity is thanks to the rise in natural gas prices. Qatar is the world’s largest exporter of liquefied natural gas (LNG). European natural gas prices surged from the second half of last year due to concerns over supply-demand imbalances. The Ukraine war further fueled the rise in gas prices. Russia reduced gas supplies to Europe in response to Western sanctions, and many European countries including Germany, France, Italy, and Belgium negotiated LNG purchases with Qatar.

Qatar’s large-scale LNG investment has proven to be a masterstroke. Since last year, Qatar has invested $29 billion to start construction of six new LNG plants. Once completed, Qatar’s annual LNG production will increase by 60%, reaching 130 million tons by 2027.

UK’s largest oil refiner Shell announced on the 5th that it will participate in the $29 billion LNG plant construction project through a joint venture with QatarEnergy, Qatar’s state-owned energy company. Shell is expected to secure a 6.25% stake in the Qatar LNG project. Shell is the fifth global partner in the Qatar LNG project, following ExxonMobil, Total, Eni, and ConocoPhillips. All of the West’s leading oil companies have joined.

Shell had previously secured LNG from Russia’s Sakhalin-2 gas field but has recently found it difficult to utilize Sakhalin-2 due to Russia’s nationalization plans. Qatar LNG is expected to replace Russian LNG. Morgan Stanley predicted that global LNG consumption could increase by 60% by 2030 as Europe seeks alternative gas suppliers to Russia. The Ukraine war has increased Qatar’s influence in the global energy market.

◆ Saudi Arabia invests in Nintendo and negotiates with Aston Martin = Saudi Arabia, the Middle East’s powerhouse whose GDP surged sharply in the first quarter thanks to oil prices, has also embarked on active investments. Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF), purchased a 5% stake in Japanese game company Nintendo for $2.98 billion on May 29. In February, PIF disclosed that it holds more than 5% stakes in Nexon and Capcom, showing active recent investments in game companies.

PIF is led by Crown Prince Mohammed bin Salman, who is scheduled to meet US President Joe Biden this week. PIF aims to diversify investments across various regions and industries, moving away from its traditional focus on Saudi oil and gas businesses.

At the end of last month, a foreign media outlet reported, citing sources, that PIF is negotiating to acquire shares in luxury car brand Aston Martin. The source said PIF already holds stakes in Lucid Motors and McLaren and plans to invest about ?200 million in Aston Martin.

Bloomberg reported earlier this year that PIF plans to double its assets under management by 2025 and invest more than $10 billion in listed stocks this year alone.

Saudi Arabia’s economic growth rate in the first quarter of this year was 9.6%, the highest since the third quarter of 2011 (13.6%). The oil sector’s GDP surged 20.4%, leading the economic growth in the first quarter. The International Monetary Fund (IMF) predicted in its April World Economic Outlook report that Saudi Arabia’s economic growth rate will reach 7.6% this year, with GDP hitting $1 trillion for the first time ever. Saudi Arabia, the UAE, and Qatar are expected to benefit from rising oil and gas prices.

This content was produced with the assistance of AI translation services.