Are Saudi equities ready to go mainstream? | ZAWYA MENA Edition

Are Saudi equities ready to go mainstream? | ZAWYA MENA Edition:

"Many will find it a bit of a mystery that Saudi equities still do not form part of the most important international benchmarks. Despite solid macro-economic credentials, a market that has outperformed emerging and global equities for the past 20 years is still kept out by major index providers. If you buy a global equities ETF or index fund today, whether it has exposure to emerging markets, developed markets or otherwise, the chances are that you will have no direct investment in Saudi Arabia. This can seem somewhat odd as the Saudi market has a number of things going for it. It is large, representing between 40 and 60 per cent of the total available market capitalisation in the region, depending on index methodology. It is also liquid with an average daily volume above $1 billion over the past year, although this is a number that used to be significantly higher in previous years. It also counts some of the most important companies in the region: of the top 20 regional companies, 13 are from Saudi Arabia. Any investor seeking to find diversification opportunities by going global should seriously consider including this market in their investment universe. However, index providers have previously been held back by accessibility issues because of significant restrictions on foreign investors. Although it was possible to find a way into the Saudi market via derivatives, little progress was made on direct access until the Capital Market Authority decided to introduce the Qualified Foreign Investor (QFI) programme in 2015. Even then, there were a number of specific criteria to fulfil before an institution could gain full access to the cash market."



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