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    Foreign investors flock to flagship Saudi economic conference — but face less free-flowing cash

    Thousands of financiers, founders and investors are set to descend on the Saudi capital of Riyadh for the eighth edition of the kingdom’s Future Investment Initiative.
    As Saudi Arabia moves full steam ahead with its focus on domestic investment, it’s introduced more stringent conditions for foreigners coming to the kingdom to take capital elsewhere.
    The kingdom is taking clear steps to scale back spending, as oil prices fall well below its fiscal breakeven figure and it continues with crude production cuts agreed upon by OPEC+.

    A delegate arrives at the King Abdulaziz Conference Centre in Saudi Arabia’s capital Riyadh to attend the Future Investment Initiative (FII) forum.
    Fayez Nureldine | Afp | Getty Images

    Thousands of financiers, founders and investors are set to descend on the Saudi capital of Riyadh for the eighth edition of the kingdom’s Future Investment Initiative, the flagship economic conference at the heart of Vision 2030 — the multi-trillion dollar plan to modernize and diversify Saudi Arabia’s economy.
    Described in past years by some attendees as a bonanza for Saudi cash, fund managers who spoke to CNBC this year draw a distinctly different picture as the kingdom simultaneously upholds more requirements for prospective fundraisers and investors, while also facing a revenue crunch amid lower oil prices and production.

    “Without question, it’s gotten way more competitive to attract money from the kingdom,” Omar Yacoub, a partner at U.S.-based investment firm ABS Global, which manages nearly $8 billion in assets, told CNBC. “Everyone and anyone has been going to ‘kiss the rings,’ so to speak, in Riyadh.”
    “Competition for capital has heated up, combined with other factors such as Saudis always having a ‘home bias’ towards investing, plus the broader dynamic of a tighter budget throughout the kingdom due to lower oil prices,” Yacoub said. “This has meant that investing internationally has become much more selective.”
    As Saudi Arabia moves full steam ahead with its focus on domestic investment, it’s introduced more stringent conditions for foreigners coming to the kingdom to take capital elsewhere. The kingdom’s $925 billion sovereign wealth fund, the Public Investment Fund, saw its assets jump 29% to 2.87 trillion Saudi riyals ($765.2 billion) in 2023 — and local investment was a major driver.

    Saudi Arabia’s recently-updated Investment Law seeks to attract more foreign investment as well — and it’s set itself a lofty target of $100 billion in annual foreign direct investment by 2030. Currently, that figure is still a long way from that goal as foreign investment has averaged around $12 billion per year since Vision 2030 was announced in 2017.
    “It’s no longer about ‘take our money and leave’ — it’s about adding value,” said Fadi Arbid, founding partner and chief investment officer of Dubai-based investment manager Amwal Capital Partners. “Value meaning hiring, developing the asset management ecosystem, creating new products, bringing in talent, and investing in Saudi capital markets also. So it’s multi-faceted investment, not only a pure financial transaction. It’s beyond that.”

    ‘More disciplined, more rational’

    At the same time, the kingdom is taking clear steps to scale back spending, as oil prices fall well below its fiscal breakeven figure and it continues with crude production cuts agreed upon by OPEC+.
    That fiscal breakeven oil price — what the kingdom needs a barrel of crude to cost in order to balance its government budget — has risen sharply as Saudi Arabia pours trillions of dollars into giga-project NEOM.
    The IMF’s latest forecast in April, put that breakeven figure at $96.20 for 2024; a roughly 19% increase on the year before, and about 28% higher than the current price of a barrel of Brent crude, which was trading at around $72.75 as of Monday morning.
    “I don’t think Saudi has the same means that they had literally two years ago,” one regional investor, who requested anonymity in order to speak freely, said. Nonetheless, they added, the kingdom “remains one of the very few countries that still have money to give. It might be somewhat on pause today, but … now it’s more disciplined, more rational.”

    Some fund managers with years of experience in the Gulf suggested it may be too little too late for many of the investors making their first forays to the kingdom.
    “You should have started that process two, three, four years ago,” Arbid said. However, he added, “For those that are coming in queue now, that doesn’t mean that they shouldn’t position — because it’s a cycle, right? But now, I think they’re more deliberate about it — they say you need to commit to the country.”
    One example is the kingdom’s headquarters law, which went into effect on Jan. 1, 2024, and requires foreign companies operating in the Gulf to base their Middle Eastern HQ offices in Riyadh if they want contracts with the Saudi government.

    In the shadow of regional war

    The glitzy conference, held in the opulent Ritz-Carlton Riyadh, also takes place against the backdrop of regional war and just over a year after Israel launched its war on Hamas in Gaza.
    In that time, attacks between Israel and Iranian proxies including Hezbollah and Yemen’s Houthis have soared, with the Jewish state invading Lebanon in September. The region has been on tenterhooks awaiting Israel’s avowed revenge against Iran for its missile barrage over Tel Aviv and other parts of the country on Oct. 1.
    Early on Saturday, Israel struck military sites in Iran targeting missile manufacturing factories. Israel’s military later said it had completed “targeted” attacks in Iran, adding that it was ready to “conduct defensive and offensive action.”
    Oil prices and the Saudi economy appear to so far have stayed largely unscathed, dropping 4% early Monday after Israel’s weekend strike on Iran. A key reason for that may be the rapprochement deal the kingdom signed with Iran, brokered by China, in March 2023.

    “Saudi has done a phenomenal job recently of shielding itself from geopolitical events,” Arbid said.
    That is also aided by the fact that local investors make up the majority of market participants, and local investor confidence is strong. The Tadawul All Shares Index, Saudi Arabia’s leading stock market index, is up 16.48% in the last year.
    Still, some analysts in the region warn that the expanding crises in the Middle East have the potential to cause further instability.
    “The war has gradually escalated to the point where there is a de-facto regional war,” Aziz Alghashian, director of research at the Observer Research Foundation Middle East, told CNBC. “The ongoing war is not only a geopolitical crisis, but the continuation of it has potential to create more radicalization in and around the region.”
    “Attracting FDI and tourism, while maintaining oil prices at a desired level, are key for keeping Saudi Arabia’s mega projects and diversification plans on track,” Alghashian said.
    “This of course is complicated by regional war, and so economy and security go very much hand in hand.” More

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    Japan stocks rally amid weakening yen after coalition drubbing

    TOKYO (Reuters) -Japanese stocks rose strongly on Monday as the yen sank to a three-month low after Prime Minister Shigeru Ishiba’s coalition lost its parliamentary majority in a drubbing in Sunday’s election, raising uncertainty over the path for policy and the economy.Ishiba’s Liberal Democratic Party (LDP), which has ruled Japan for almost all of its post-war history, and junior coalition partner Komeito took 215 seats in the lower house of parliament – well short of the 233 needed for a majority – public broadcaster NHK reported. The LDP previously held 247 seats and Komeito held 32.The outcome may force parties into fractious power-sharing deals to rule, potentially ushering in political instability.The Nikkei share average rose 1.5% to 38,492.25 as of 0039 GMT, and was earlier up nearly 2%. It had opened 0.4% lower.The yen sank as low as 153.34 per dollar for the first time since July 31, and last traded about 0.6% weaker at 153.22 per dollar.”The result of the election itself is a negative for the stock market, without a doubt, because of the rise in political uncertainty,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui (NYSE:SMFG) DS Asset Management.”However, the rally is partly on the fact that this big risk event is now behind us, so there’s a sense of relief. That and the weaker yen.”Benchmark 10-year Japanese government bond futures fell 0.07 yen to 143.99 yen, reversing an earlier rise.The five-year JGB yield rose 0.5 basis point (bp) to 0.58%, the 20-year yield added 2 bps to 1.8%, the highest since Aug. 8, and the 30-year yield gained 3 bps to 1.38%.The election result draws market attention to the policy stance of opposition parties that could become potential partners, many of which favour low interest rates. Markets could also price in more aggressive government spending. The upshot of the post-election uncertainty is “the Bank of Japan to hike later and more fiscal expansion,” leading the yield curve to steepen, said Naka Matsuzawa, chief Japan macro strategist at Nomura.”Reflationary, Abenomics-style policy will stay.”Coalition losses could reduce the chance the next government will implement “more challenging agenda items such as hiking the corporate tax rate”, analysts at Morgan Stanley said in a note.Analysts at BNY said the dollar could potentially rise to 155 yen again, as the BOJ downplays the immediate need for a rate increase and the Japanese election risks stoke additional political instability.Japan’s general election comes nine days before votes are counted in the closely contested U.S. presidential race, with investors weighing the possibility of a bullish dollar and higher yields in the event of another Donald Trump presidency and Republican sweep of the Senate and House of Representatives.(Reporting and writing by Brigid Riley and Kevin Buckland in Tokyo; Additional reporting by Vidya Ranganathan in Singapore; Editing by William Mallard and Lisa Shumaker) More

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    Japan’s government in flux after election gives no party majority

    TOKYO (Reuters) -The make-up of Japan’s future government was in flux on Monday after voters punished Prime Minister Shigeru Ishiba’s ruling coalition, leaving no party with a clear mandate to lead the world’s fourth-largest economy.The uncertainty sent the yen currency to a three-month low as investors and analysts prepared for days, or possibly weeks, of political wrangling to form a government and potentially a change of leader.That comes as the country faces economic headwinds, a tense security situation fuelled by an assertive China and nuclear-armed North Korea, and less than a week before U.S. voters head to the polls in another unpredictable election. Ishiba’s Liberal Democratic Party (LDP) and its junior coalition partner Komeito took 215 seats in the lower house of parliament, down from 279 seats, as voters punished the incumbents over a funding scandal and a cost-of-living crunch. Two cabinet ministers and Komeito’s leader, Keiichi Ishii, lost their seats.The biggest winner of the night, the main opposition Constitutional Democratic Party of Japan (CDPJ), had 148 seats, up from 98 previously, but also still well short of the 233 majority.As mandated by the constitution, the parties now have 30 days to figure out a grouping that can govern, and there remains uncertainty over how long Ishiba – who became premier less than a month ago – can survive after the drubbing. Smaller parties also made gains and their role in negotiations could prove key. “Whether or not Prime Minister Shigeru Ishiba resigns as LDP leader today, it seems unlikely that he will survive to lead a new government as prime minister … though it is possible he could stay on as caretaker,” said Tobias Harris, founder of Japan Foresight, a political risk advisory firm.Ishiba is scheduled to hold a press conference at 2 p.m. (0500 GMT). Ahead of the election, the LDP had been planning to convene parliament on Nov. 7 to confirm the prime minister, according to Japanese media including Jiji and the Yomiuri newspaper. CDPJ leader Yoshihiko Noda has said he would work with other parties to try and oust the incumbents, though analysts see this as a more remote possibility. The LDP has ruled Japan for almost all of its post-war history and the result marked its worst election since it briefly lost power in 2009 to a precursor of the CDPJ.In a statement, the head of Japan’s most powerful business lobby said the country needed political stability to steer an economy that faced urgent tasks such as boosting the supply of nuclear energy and maintaining the momentum for wage hikes.”We strongly hope for policy-oriented politics through the establishment of a stable government centred on the LDP-Komeito (coalition),” Keidanren Chairman Masakazu Tokura said. More

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    PBOC activates open market outright reverse repo operations facility

    The bank took the decision to maintain a “reasonable abundance of liquidity in the banking system and further enrich the central bank’s monetary policy toolbox,” it said in a statement. State-owned Shanghai Securities News said in an article published shortly after the People’s Bank of China’s (PBOC)notice that the facility was expected to cover three- and six-month tenors and that it would aid liquidity adjustments over the next year, citing people close to the central bank.The PBOC’s announcement said its new tool would have a tenor of less than one year. “The central bank’s choice to launch this new tool at this time is also expected to be a better hedge against the concentrated expiry of medium-term lending facility before the end of the year,” the article said. More

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    Oil slides on Mideast respite, yen down as Japan govt loses majority

    Japan’s Nikkei, after initially falling, rose 1.6% and the yen slipped as far as 0.5% to 153.3 per dollar following the ruling Liberal Democratic Party’s (LDP) weakest result since 2009 in Japan’s weekend election.Brent crude futures were 4.2% lower and traded as cheaply as $67.80 a barrel after Israel’s response to an Iranian missile attack focused, so far, on missile factories and other sites near Tehran and not on disrupting energy supplies. [O/R]In Japan, the LDP which has ruled for most of the post-war years and junior coalition partner Komeito won 215 lower-house seats at Sunday’s election, public broadcaster NHK reported.This falls well short of the 233 needed for a majority and the yen was squeezed since investors figured any government that emerges is likely to make a dovish shift in economic policies. [.T][FRX/]”The markets are likely to think this means more trouble for the yen with 155 the first target and (the finance ministry’s) line in the sand at 160,” said Bob Savage, head of markets strategy and insights at BNY in a note.Gains in the stock market, which often moves in the opposite direction to the yen as a weaker currency can help exporters, were led by technology companies.RISING DOLLARBroader currency markets were steady, leaving the dollar on course for its largest monthly rise in 2-1/2 years as signs of strength in the U.S. economy and the prospect of a Donald Trump presidency have driven U.S. yields sharply higher.At 4.23%, benchmark 10-year Treasury yields are up 43 basis points through October, against a rise of 16 bps for 10-year bunds and 23 bps for gilts.Markets price almost no chance of a Federal Reserve rate cut at its November meeting, down from a 50% chance of a 25 bp cut a month ago, according to CME’s FedWatch tool.The euro was steady on Monday at $1.0796 and down 3% through October. The New Zealand dollar has lost nearly 6% through the month, additionally weighed by a dovish central bank and disappointing stimulus plans from China.Elsewhere U.S. stock futures rose 0.5% in early trade ahead of a big week of earnings and data.Five of the “Magnificent Seven” group of megacap companies are set to report: Google parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT), Facebook (NASDAQ:META) owner Meta, Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN).The U.S. jobs report on Nov. 1 comes as investors are weighing whether a stronger-than-expected economy could lead to fewer interest rate cuts, while inflation readings are due in Europe and Australia.Weekend data showed China’s industrial profit dived 27.1% in September versus a year earlier.Gold, which hit record highs last week, hovered just shy of those levels at $2,736 an ounce.(This story has been refiled to fix a typo in paragraph 3) More

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    Seven European countries match US in startup-friendly laws, report says

    While stock options were integral to Silicon Valley’s success, Europe has been hampered by bureaucracy and by taxing employees too early, among other restrictions.The European Union needs a coordinated industrial policy, rapid decisions and massive investment if it wants to keep pace with the U.S. and China economically, Mario Draghi said in a long awaited report last month. Over 500 startup CEOs and founders joined a campaign called “Not Optional” in 2019 to change rules that govern employee ownership  —  the practice of giving staff options to acquire a slice of the company as they compete for talent with U.S. firms.Germany, France, Portugal and the UK lead European countries in making changes that match or exceed those of the U.S., while Finland, Switzerland, Norway and Sweden got lower ratings in the Index report.When companies such as Revolut and others go public, that ownership translates into real money for employees, said Martin Mignot, a partner at Index and an investor at fintech Revolut, which is valued at $45 billion.($1 = 0.9236 euros) More

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    Yen slips as Japan’s election result clouds BOJ rate hike prospects

    SINGAPORE (Reuters) – The yen touched a three-month low on Monday as Japan’s ruling coalition lost its parliamentary majority and investors figured that would likely slow future interest rate hikes, while the dollar headed for a monthly gain on rising U.S. yields.On the dollar, the yen hit its weakest since late July at 153.3 in early-morning trade and it touched the same milestone at 165.36 to the euro.Prime Minister Shigeru Ishiba’s Liberal Democratic Party, which has ruled Japan for almost all its post-war history, and coalition partner Komeito took 209 of 465 lower house seats, public broadcaster NHK reported, with all but 20 accounted for.That was down from the 279 seats they held previously and marked the coalition’s worst result since it briefly lost power in 2009.A period of fractious deal making is likely to ensue and with cost-of-living pressures a major issue, traders think any resulting government will pressure the Bank of Japan to take policy normalisation very slowly.”The market sees a higher risk of economic policy becoming more dovish,” said analysts at Nomura in a note.DOLLAR GAINSElsewhere currency markets were broadly steady, leaving the dollar on course for its largest monthly rise in 2-1/2 years as signs of strength in the U.S. economy and bets on Donald Trump winning the presidency lifted U.S. yields.At $1.0795 the euro was steady on Monday but down more than 3% on the month. Sterling bought $1.2961 for a 3.1% drop through October so far.The U.S. dollar index has climbed 3.6% during October, its sharpest monthly rise since April 2022.Ten-year Treasury yields are up 40 basis points for October against a rise of 16 bps for 10-year bunds and 23 bps for gilts.The Australian dollar bought $0.6610 on Monday, with disappointment at the lack of detail or urgent government spending in China’s stimulus plans helping drag it about 4.5% lower through October. The New Zealand dollar traded near a three-month low of $0.5974, down nearly 6% for the month.The week ahead is crowded with data, with inflation readings for Europe and Australia, gross domestic product data in the U.S. and purchasing managers’ indexes for China.An interest rate decision is also due in Japan on Thursday, though no policy change is expected.Weekend data showed China’s industrial profits plunged in September, with a year-on-year drop of 27.1%. The yuan was under pressure in early offshore trade and headed for a monthly fall of around 1.9%. More