Saudi gov't approves new state-owned investment firm

Saudi Arabia has given the go ahead for the setting up of a new state-owned investment firm, it was reported on Tuesday.

The setting up of Hassana (Arabic for "Immunity") Investment Co, owned by the General Organisation for Social Insurance (GOSI), was approved on Monday at a cabinet meeting chaired by King Abdullah, state news agency SPA said, quoting a cabinet statement.

The move is being tipped as an attempt by the government to grant the largest state-run pension fund greater independence from the central bank in managing its investments, mainly abroad.

GOSI was among the worst affected institutions by a meltdown in the Saudi stock market which has lost close to three-quarters of its value since February, 2006.

The rout has raised concerns over the ability of the institution that is supposed to provide social welfare and pensions for some four million employees, mainly from the private sector.

It has budgeted SR8.9bn riyals for the 2009 financial year.

Hassana will "invest for its own account and for the account of GOSI in financial instruments by buying and selling in local, regional and international stock markets," it added.

It will also lead the development of real estate, commercial and services projects, and will also be allowed to sell the projects, the cabinet said.

It did not say how the inception of Hassana would affect GOSI's strategy or the way it manages its assets.

GOSI officials could not be immediately reached for comment.

In addition to investment abroad, GOSI is the second-largest institutional investor in the Saudi stock market after the state-run Public Investment Fund (PIF), which is affiliated to the finance ministry.

GOSI holds stakes in virtually every blue-chip Saudi firm including largest-listed lender Al Rajhi bank, Saudi Telecom and Saudi Fertilizers Co.

Its governor Suleiman Al Humaid said in remarks published on Al Riyadh newspaper last year that the kingdom's central bank - the Saudi Arabian Monetary Agency (SAMA)- manages GOSI's investments abroad, which represent 35 percent of the fund's overall investments.

He said GOSI's investments in the Saudi stock market were worth SR86.6bn ($23.1bn) as per Oct. 14, 2008.

But the stock market's benchmark index has fallen 33.7 percent since then.

With Hassana, GOSI now has a "a legal entity to invest the money", said John Sfakianakis, chief economist for HSBC's Saudi affiliate.

"They are setting up an entity that has a legal form so they can be accountable," Sfakianakis said. "This is important especially during this global financial crisis".

The government approved in July the setting up of an investment company affiliated to PIF which it called Sanabil Al Saudia. The company, which has yet to start operations, was endowed with a capital of $5.3 billion to invest in stocks, bonds, real estate, foreign currencies and commodities.

SAMA gives few details on its foreign investment policies, though its top officials have said the kingdom holds "very liquid, very safe, minimal risk..." international assets. (Reuters)