Daily Management Review

Right Now The Most Sought After Emerging Market Is Saudi Arabia


03/15/2018




Right Now The Most Sought After Emerging Market Is Saudi Arabia
As the cloud of uncertainty around the launch of the largest ever IPO ever of Saudi Aramco and the recent crackdown on corruption in Saudi Arabia clears, investors are committing millions of dollars in the kingdom. 
 
According to EPFR Global, a financial market data provider, beginning start of the year and March 7, about $100 million of investment from equity funds was made. That net inflow of foreign investment is equal to 7% of the net assets of the kingdom. This inflow also marks a much stronger foreign funds inflow compared to emerging market funds.
 
A number of other indices were outpaced by the Saudi stock market - the Tadawul, which gained as much as 7% during the period.
 
Last year, the campaign against corruption in Saudi Arabia saw dozens of senior officials, wealthy businessmen and investors being rounded up which had rattled the confidence of the investors.
 
That confidence however seems to be back. Vision 2030- the economic diversification of the kingdom appears to be having a positive impact, there is growth in the economy and the oil prices are rising. These have driven investor confidence.
 
"Strong underlying fundamentals, supported by the government's efforts to diversify the economy, will translate into increased investment activity in the kingdom," Sammy Kayello, CEO of Morgan Stanley Middle East and North Africa, said.
 
In addition to transforming the Tadawul from the perspective of foreign investors, the government should have billions of dollars for investing by the sale of only a fraction of the state owned largest oil company in the world – Saudi Aramco through an IPO.
 
A section of investors do not appear to be waiting for the launch of the IPO – touted to be the largest ever, even though no date or the exchange for launching is yet to be announced.
 
The private sector in the kingdom is already witnessing a spur in economic activities because of the initiatives driven by Vision 2030. And many analysts are viewing with positivity the drive by the kingdom to crackdown on corruption yielding about $4107 billion.
 
"Fighting corruption was taken positively especially by bringing back sizable funds," said Tariq Qaqish, managing director of asset management at Menacorp in Dubai. "The young leadership is taking bold decisions to do positive changes to the lifestyle of Saudi nationals that will create lots of business opportunities," he added.
 
The cause is being helped by reform of the Saudi stock market. The Saudi stock exchange could be ranted emerging market status following a review in June by index compiler MSCI. FTSe is doing the same at the end of the current month.
 
"It's not a question of yes or no. It will happen," HSBC Saudi Arabia CEO Majed Najm said. "Since the beginning of the year, Saudi Arabia topped major emerging and frontier markets for equity liquidity and flow," he said. in anticipation of good news, funds are already being allocated to Saudi Arabia by some funds, he added.
 
"A number of major equity and debt transactions took place in 2017 and we expect this trend to continue this year. Stabilizing oil prices should also support the growth and attract international institutional investors as a result," said Kayello at Morgan Stanley
 
(Source:money.cnn.com)






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