Two prominent asset managers have launched dedicated Saudi Arabia investment funds seven months after the killing of journalist Jamal Khashoggi sparked international outrage. The decision by BlackRock and HSBC has prompted criticism that both managers have prioritised profits over human rights with their swift return to business as usual with the kingdom.
Larry Fink and John Flint, chief executives of BlackRock and HSBC respectively, attended a financial conference held in Riyadh last month alongside other senior figures including Frédéric Oudéa, chief executive of Société Générale, and David Schwimmer, chief executive of the London Stock Exchange. Mr Fink and Mr Flint had withdrawn from a flagship Saudi Arabian investment conference dubbed “Davos in the Desert” in October soon after Khashoggi’s death.
BlackRock and HSBC Global Asset Management have each launched exchange traded funds in the past month that will track the MSCI Saudi Arabia 20/35 Capped Index, which focuses on mid and large-cap companies in the Gulf state.
The HSBC unit, which manages $451bn, said the launch was “in response to interest from international investors following the inclusion of Saudi Arabian equities into global indices.”
MSCI will include the country in its influential emerging markets index this summer and Saudi Arabia’s stock market was also recently admitted into emerging market indices run by FTSE Russell and S&P Dow Jones.
BlackRock’s new product is a Ucits version of an ETF available for US investors. It said its launch was in response to “significant client demand . . . in anticipation of the MSCI index inclusion.” JP Smith, founder of EcStrat, an investment consultancy, said:
“If these are index trackers then they probably have no real alternative but the broader picture is that while everybody pays lip service to environmental, social and governance [criteria], the bottom line is that human rights-related considerations are secondary to the financial imperative.”
Other financial groups have not held back from doing business with Saudi Arabia despite increased scrutiny.
Saudi Aramco, the state-backed oil producer, attracted a record-breaking $100bn in orders ahead of its first international bond sale last month and in March bought a stake in Sabic, the petrochemicals company. International banks, including Goldman Sachs, JPMorgan, Morgan Stanley, HSBC and Citi were involved in those deals. BlackRock plans to open an office in Riyadh.
Under the Vision 2030 plan launched three years ago, Crown Prince Mohammed bin Salman plans to reduce the economy’s dependence on oil by bolstering the private sector. He has denied any involvement in Khashoggi’s death, which Riyadh has blamed on a rogue operation.
The HSBC MSCI Saudi Arabia 20/35 Capped Ucits ETF began trading on the London Stock Exchange on Wednesday. BlackRock’s iShares MSCI Saudi Arabia Capped Ucits ETF was launched on April 10 and attracted $5.2m in assets in the first three weeks of trading.
Source Financial Times