(Bloomberg) -- Nintendo Co.’s shares rose as much as 3.9% after a senior executive with Saudi Arabia’s sovereign wealth fund told local media it’s considering increasing its stakes in Japanese game companies.
The stock climbed its most in more than a week, outpacing the market, after Kyodo News reported the Arab Gulf country’s Public Investment Fund was weighing deploying more capital to Nintendo and its sector peers. Prince Faisal bin Bandar, vice chairman of PIF subsidiary Savvy Games Group, said he would favor doing such a move with the support of the companies themselves.
The Saudi government is keen to mold the kingdom into a global gaming industry player and diversify a portfolio that relies heavily on oil. It’s betting $38 billion on the country’s potential to become the next hub for the video-game industry, and has been making bets in Japanese and Korean content providers. It’s presented itself as a long-term investor with the patience to wait out fallow periods in a volatile industry where hits are never certain.
The PIF, which had around $760 billion in assets under management at the end of last year, is already one of Nintendo’s biggest shareholders with an 8.6% stake, according to data compiled by Bloomberg. The fund has in the past also made multibillion-dollar bets on other gaming and e-sports companies including Tencent Holdings Ltd., Activision Blizzard Inc. (now part of Microsoft Corp.) and Kakao Entertainment Corp. PIF’s other game sector holdings in Japan also rose Monday morning. Nexon Co. gained as much as 3%, while Capcom Co. rose 2% and Koei Tecmo Holdings Co. rose 2.8%.
“It’s of note that the Saudis are doing this as part of national policy,” said Ryoutarou Sawada, senior analyst at Tokai Tokyo Intelligence Laboratory. “We expect this kind of interest to spread.”
The kingdom has also amped up efforts to woo gaming and technology companies to set up offices in the Middle East, part of a push to bring artists and animators to the region and generate its own content. It’s poured billions of dollars into tourism, with PIF backing development of a theme park outside Riyadh that features characters from the fictional world of Dragon Ball, the popular Japanese manga and animation franchise.
A bigger stake in the hands of the Saudi wealth fund shouldn’t pose a big problem for Nintendo, as it would be in line with the Kyoto-based company’s goal to have more people play its games worldwide, said Tomoaki Kawasaki, senior analyst at Iwaicosmo Securities. “Stronger relations with Saudi Arabia may mean new opportunities for growth in the kingdom and in other markets,” he said.
--With assistance from Vlad Savov.
(Updates with analyst commentary)
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