According to insights from financial analysts at Morgan Stanley, Saudi Arabia’s state-owned Public Investment Fund (PIF) is poised to escalate its borrowing efforts after successfully securing $7 billion through two bond issues earlier this year.
The wealth fund, which oversees assets exceeding $700 billion, is participating in a wave of bond issuances by emerging-market nations, a movement that has reached unprecedented levels in over two decades. The PIF’s recent moves include a $2 billion Islamic bond sale and a $5 billion high-grade bond sale in January.
Strategist Pascal Bode of Morgan Stanley projects that the PIF is not likely to halt its borrowing spree. With the fund’s treasury assets diminishing and its expenditure needs on the rise, another bond issuance in the latter half of 2024 could push total fundraising to approximately $10 billion to $11 billion.
The PIF is central to Crown Prince Mohammed bin Salman’s strategy to wean the Saudi economy off its oil dependency. With targets to channel hundreds of billions of dollars into sectors ranging from electric vehicles and semiconductors to tourism and sports, the PIF has announced plans to ramp up its capital deployment to $70 billion annually post-2025.
In a recent transaction, the PIF sold seven-year dollar-denominated sukuk, or Islamic bonds, at a rate of 85 basis points above US Treasuries. The offering, which was initially proposed at around 115 basis points over Treasuries, attracted substantial investor interest, with order books surpassing $16 billion.
For the Islamic bond sale, the wealth fund appointed global financial institutions including Goldman Sachs Group Inc., HSBC Holdings Plc, and Standard Chartered Plc as coordinators. While the PIF has yet to issue a formal response to inquiries about these financial maneuvers, the market’s reception indicates strong confidence in the fund’s future initiatives.