Market Liberalization in Saudi Arabia: Opportunities Galore for Foreign Investors
Published on 19 Oct, 2015
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In July 2014, authorities approved plans to fully open the Saudi stock exchange (Tadawul) to foreign direct investments (expected by 1H 2015). The move is believed to be a precursor to the much coveted inclusion of Tadawul in the MSCI EM Index (likely in 2017). Following the recent upgrade of the UAE and Qatar to emerging-market status, this could enhance MENA’s visibility among global investors and increase its weightage from 1.35% currently to 5.35% (with Saudi Arabia alone accounting for 4% of this).
In this backdrop, Aranca’s special report Market Liberalization in Saudi Arabia: Opportunities Galore for Foreign Investors examines the potential opportunity for global investors (both passive and active fund managers). While the likely inclusion of Saudi Arabia in the MSCI EM Index in 2017 would imply an allocation of around USD40bn to the Kingdom by global portfolio managers, our back of the envelope calculations suggest that the market cap could increase by USD150bn if the Mcap/GDP ratio improves by just 10bps. The report also examines the fundamental strength of the Saudi economy and the development of its regulatory regime, which is a key factor for sustained global interest. We also examine how markets in India, UAE and Qatar benefitted significantly – in terms of market activity (volumes, turnover, index movement) as well as rise in foreign ownership – after opening their stock market to foreign investors.