Saudi Arabia could attract $35 billion when it opens

Stock market2Saudi Arabia's plan to open its stock market to direct foreign investment in the first half of 2015 could increase foreign exposure to the market to $35 billion (€26 billion).

The estimate, which assumes levels of foreign equity ownership in Saudi Arabia will become comparable to other markets in the Gulf region, comes from Deutsche Bank analyst Aleksandar Stojanovski.

This figure includes the roughly $4 billion that foreign investors have accumulated since 2009, when indirect ownership of Saudi stocks by foreign investors first became possible.

"The opening of the Saudi stock market would be a major positive for the Middle East and North Africa region, with a total market capitalisation of $1.2 trillion, where Saudi Arabia alone accounts for 45%," says Stojanovski.

The Saudi regulator, the Capital Market Authority, says it will aim to publish draft rules for the opening up of the country's stock market, known as the Tadawul, next month, after which they will be subject to a 90-day review.

Investors will be curious to see if the CMA imposes caps on foreign ownership and what criteria are needed to qualify as a foreign investor – one guess is that the CMA will require investors to have more than $5 billion under management and a track record of several years of stable investing, to limit volatility brought by the influx of foreign investors.

The CMA will also have to address the problem of the country's T+0 settlement cycle, in which trades are executed and settled on the same day. Most global markets operate a T+2 or T+3 cycle and, for international investors to participate in the market, some kind of workaround solution must be found, in which sub-custodians in the country either pre-fund securities trades or establish credit limits with local brokers.

Despite these obstacles, regional investors and fund managers were galvanised by the surprise announcement from the Saudi authorities, which came just before holidays for the Muslim festival of Eid.

"It's the biggest thing to happen to the regional equity markets for a decade plus," says Khalid Murgian, managing director, Neuberger Berman, who is based in Dubai.

©2014 funds global mena

Sponsored Profiles

There’s no doubt that Africa has been seen increasingly as an attractive prospect for inbound investment in recent years, with investors seeing real potential in the continent, particularly in the private equity, infrastructure and real estate asset classes, as it experiences strong economic growth.

Plausible explanations exist for why low-volatility stocks perform better than their high-volatility counterparts.

Aberdeen Asset Management has set up its first Middle East office in the newly established Abu Dhabi Global Market. Andrew Paul, senior executive officer, explains why.

A recent sovereign bond issue from Saudi Arabia underlines the appeal of emerging market investing. What must investors consider when allocating to this asset class? Firas Mallah of BMO Global Asset Management shares his views.

Executive Interviews

INTERVIEW: ‘Financing is the blood of Iran’s economy’

Amid a fresh wave of American sanctions, Romil Patel spoke to Meysam Hamedi, director of financial markets and instruments at Iran’s Securities & Exchange Organization (SEO).

INTERVIEW: Totally mega

In 2016, global consulting firm PWC forecast the emergence of five global ‘megatrends’ in the next two decades. Stephen Anderson, its Middle East clients and markets leader, talks about their...

INTERVIEW: Protecting the investment

Rasmala’s trade finance fund recently passed $100 million in assets. Doug Bitcon, head of credit strategies, explains why he has to be hands-on.

EXECUTIVE INTERVIEW: A natural interest in the topic

Since 2016, Guillermo Ortiz has been a chairman of Latin America’s BTG Pactual. The former central banker of Mexico talks to Nick Fitzpatrick.


Middle East Investor Roundtable 2020: Dimensions of diversification

Investors in the Middle East consider the tools that will be needed to navigate the Covid-19 crisis, the continued appetite for dividend and why it’s all about tech. Chaired by Romil Patel.

South Africa asset management roundtable: Global rebound on ice

Experts discuss the investment implications of the coronavirus pandemic, a delayed rebound in global growth and dealing with South Africa’s energy issues head on. Chaired by Romil Patel in Cape Town.

South African roundtable: Taking the bull by the horns

Our panel discusses Chinese investment in Africa, financial institutions’ contribution to economic sustainability and regulatory concerns. Chaired by Romil Patel in Cape Town.

ROUNDTABLE: Hooked to the global caravan

With the MENA region at a tipping point, our panellists talk about economic diversification, the impact of regulation and the delayed Saudi Aramco listing. Chaired by Romil Patel in Dubai.