For investors closely watching a key indicator of Saudi Arabia’s financial health, deciphering the ups and downs of its $447 billion foreign-currency reserves has become more about dividends than crude prices.
Sharp increases in the central bank’s net foreign assets now coincide with payouts from state-controlled oil producer Saudi Aramco. Disbursements of the company’s $18.75 billion quarterly dividend, almost all of which goes to the Saudi government, mean the reserves reflect less frequent but larger transfers of cash from the Dhahran-based firm.
Most recently, the correlation became apparent when reserves jumped the most in a decade in November -- Aramco paid its last dividend late that month. Similar spikes in other months last year also mirrored the timing of Aramco’s distributions to shareholders.
The closer alignment makes the kingdom’s reserve holdings more predictable. Long watched by investors, economists and currency speculators, the stockpile can now be expected to increase sharply around the dividend schedule -- and fall over the months after it in a reflection of cash flow constraints.
Saudi Arabia tethers its currency to the dollar and tends to adjust monetary policy in lockstep with the U.S. Federal Reserve. To maintain confidence in the riyal’s peg, authorities need to have enough reserves to cover every local currency in circulation and demand deposits, according to Bloomberg Economics.
No comments:
Post a Comment