Deutsche Bank: Opening up Saudi bourse ‘major positive’
Analyst says the prospect of Saudi Arabia joining MSCI Emerging Markets is ‘a reality’
A plan to open up the Saudi market to foreign investment is “a major positive” for the Middle East and North Africa, Deutsche Bank said on Wednesday.
The Saudi cabinet approved on Tuesday a plan to allow foreign financial institutions to buy and sell shares at the Saudi bourse. Valued at $530 billion, it is the largest in the region.
MENA has a total “market capitalization of $1.2 trillion, where Saudi Arabia alone accounts for 45%, and where regional liquidity is around $4 billion, of which Saudi Arabia represents 65%,” said Aleksandar Stojanovski, research analyst at Deutsche Bank.
“With over 160 listed securities, the kingdom’s stock market offers a diversified sector base,” he added.
“After an opening of the Saudi market, and assuming foreign ownership reaches a similar level to the regional equity markets, we could see up to around $35 billion of incremental foreign inflow versus the approximately $4 billion that foreigners have accumulated since 2009, when indirect ownership first became available,” said Stojanovski.
Saudi Arabia is the most liquid market in the region, with a six-month average daily trading volume of $2.5 billion, the bank said.
“With the direct trading restriction by foreign investors removed, we believe that the prospect of Saudi Arabia joining MSCI Emerging Markets becomes a reality, albeit unlikely before 2017,” Stojanovski said.