The oil-producing kingdom's stock market is officially open to foreign investors.
The Middle East's biggest economy is opening up its stock market to foreign investors for the first time.
As of yesterday, Saudi Arabia is offering direct market access to overseas investors with over $5 billion in assets under management. Its Tadawul market, valued at more than $560 billion, is expected to be upgraded from frontier to emerging markets status by 2017, according to the Financial Times.
“This is an exciting development – given the size, $554 billion market cap, and depth of the market,” said Oliver Bell, manager of T Rowe Price's Africa and Middle East fund.
The country is home to 168 listed companies covering 15 industries in Saudi Arabia – including petrochemicals, banks, telecoms, hospital groups, education and travel companies, according to the global investment manager. Notably, the oil industry, which with recent price declines has put pressure on the country's local spending plan, remains state controlled.
“A further attraction for global investors is the liquidity of the market, which can trade up to $4 billion a day. Up until now non-resident foreigners, through swaps, only make up 1 per cent of the market in terms of both value traded and percentage held. This is compared to 64 per cent ownership in Turkey and 30 per cent in Brazil or South Korea,” said Bell.
The kingdom's pivotal step in its journey to economic reform is expected to attract billions of dollars in foreign money. Last month, global property consultancy Knight Frank launched in the capital city, Riyadh, citing increasing urbanisation and a healthy non-oil sector as key drivers for its expansion.
“For a number of years, Saudi Arabia has embarked on an ambitious investment plan in order to diversify the economy away from oil revenues and create employment for its very young population – of which more than 50 per cent are under 20 years old. Some estimates suggest 3 million new jobs need to be created by 2019 to keep unemployment at the current 10 per cent,” Bell said.