Aranca Special Report on Opportunities for Foreign Investors in Saudi Arabia Post Market Liberalization

Published on 27 Aug, 2014

The report examines how the decision to fully open Tadawul to foreign direct investment is likely to boost Saudi Arabia’s market activity and foreign ownership of its stock market.

London, August 27, 2014: Aranca, a leading provider of customized research and analytics services to global clients, has released a special report titled ‘Market Liberalization in Saudi Arabia: Opportunities Galore for Foreign Investors’. Highlighting the landmark decision in July 2014 to fully open the Saudi Stock Exchange (Tadawul) to foreign direct investments, the report examines the potential opportunity for global investors (both passive and active fund managers).

The Saudi stock exchange is expected to open to foreign direct investments by 1H 2015. This 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). Given this scenario, 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, Aranca’s 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. Drawing parallels with how markets in India, UAE and Qatar performed after opening their stock market to foreign investors, the report maintains that Saudi is also expected to see a significant spurt in terms of market activity (volumes, turnover, index movement) as well as rise in foreign ownership.

To read the full report, click here.

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