Saudi Arabia said to mull relaxation of foreign ownership limits

Time: April 27, 2019   

Saudi Arabia said to mull relaxation of foreign ownership limits
The Saudi Stock Exchange has seen a surge in foreign fund flows since the start of the year due to the inclusion in the emerging markets indexes. (FAYEZ NURELDINE/AFP/Getty Images)
By Staff writer

Saudi Arabia is reportedly considering relaxing a 49 percent limit for foreign strategic investors in shares of listed companies.

Mohammed El-Kuwaiz, chairman of the Capital Market Authority told Reuters that the move is being considered due to increased demand.

Foreigners currently own 5.5 percent of Saudi equities but that could nearly double by the end of 2020, Mohammed El Kuwaiz said in an interview with Reuters in Riyadh.

“We found most strategic investors are maybe looking to build more sizeable stakes,” Kuwaiz was quoted as saying.

The kingdom, which has the Middle East’s largest exchange, has introduced a raft of reforms as it seeks to position its bourse as an international capital markets hub.

It has seen a surge in foreign fund flows since the start of the year due to the inclusion in the emerging markets indexes.

This article was first published in Arabian Business

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US, UK investors flock to Saudi-focused funds

Time: March 19, 2019  

US, UK investors flock to Saudi-focused funds
The net flow as a percentage of assets for Saudi Arabia funds increased about 48 percent this year, more than any other country in a ranking compiled by Bloomberg, after Croatia.

Exchange-traded funds in the US and the UK focused on Saudi Arabian equities are piling up new money this year, placing the Middle Eastern kingdom high in a global ranking.

A London-based ETF and another that trades in New York together attracted around $327 million in new money since the beginning of January.

The net flow as a percentage of assets for Saudi Arabia funds increased about 48 percent this year, more than any other country in a ranking compiled by Bloomberg, after Croatia.

The appetite for ETFs offered by BlackRock Inc and Invesco jumped as the $539 billion stock market becomes included in major benchmarks tracking developing countries.

FTSE Russell began adding Saudi stocks this week, in the first of five stages to be fully implemented by March 2020. MSCI Inc will follow suit in two tranches later this year.

Bets on the Saudi market through funds based abroad have been profitable. They’ve delivered a return of about 12 percent each since the start of the year, compared with a gain of 10 percent for the Tadawul All Share Index. Total assets under management for both ETFs are at the highest since their inception.

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Record foreign buying of Saudi stocks in January

Time: February 05, 2019  

Record foreign buying of Saudi stocks in January
International funds are seeking to build exposure as some of the stocks will be added to emerging-market indexes compiled by MSCI and FTSE Russell. Local funds, on the other hand, are buying less.
By Bloomberg

Foreigners made their highest net purchases of Saudi shares on record last month, following the inclusion of local stocks in major benchmarks.

Investors from outside the country and the Gulf were net buyers of around 4.4 billion riyals ($1.17 billion) of Saudi-listed stocks in January, the most for a single month since data became available in 2015.

International funds are seeking to build exposure as some of the stocks will be added to emerging-market indexes compiled by MSCI and FTSE Russell. Local funds, on the other hand, are buying less.

The purchases mark a change in trend after a sell-off triggered by the killing of Jamal Khashoggi inside the Saudi consulate in Istanbul last October. Back then, foreigners sold the most for a single month since they were allowed to directly trade in the country. As volatility surged, funds tied to the government were constantly mentioned by traders and investors as giving support to the market, by purchasing mostly large caps. The main Saudi index is up 8.9 percent this year.

Investors jumping at Saudi stocks now are finding high prices and an economic scenario that doesn’t corroborate expensive valuations, according to Tina Byles Williams and Adam Choppin, respectively the chief executive officer and investment officer at FIS Group Inc.

“Speculation around huge foreign inflows are based on naive assumptions about how index providers and ETF issuers trade through such events, and we believe those waiting for ‘dumb passive money’ in Saudi will be kept waiting come fall 2019,” they wrote in a report.

“Following index inclusion, we expect to see a fair degree of selling pressure as state affiliated Saudi investors use the inclusion as a liquidity event for chunks of their Saudi equity portfolio.”

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Market upgrade to boost foreign investments in Saudi Arabia to $30-$50 billion

Time: January 22, 2019

Mohammed bin Abdullah al-Quweiz, the president of Saudi Capital Market Authority, speaks to Al Arabiya in Davos.

Mohammed bin Abdullah al-Quweiz, the president of Saudi Capital Market Authority, has said he expects inflows of around $30-$50 billion to invest in the country’s stock market because of the recent upgrade in emerging market indices.

“These expected inflows are part of the remaining funds, and the other active investments will move after the decision to upgrade,” al-Quweiz told Al Arabiya on the sidelines of the World Economic Forum in Davos.

He said “the foreign investor will be able to own more than 50 percent of Saudi companies” adding that this will attract more foreign inflows to the Saudi financial market.

“The number of foreign investors has tripled in anticipation of the market being upgraded to emerging market indices,” al-Quweiz said. He said that there are more than 450 foreign investors in the Saudi market.

Al-Quweiz pointed out that the percentage of foreign ownership in the Saudi stock market is about 5 percent. He attributed this to recent decisions that have facilitated the entry of foreign investors.

However, he said the comparison of the Saudi market with other markets, which have been operating for a long time, might be inappropriate as “the Saudi market exposure to foreign investments was decided only in 2015.”

The Saudi stock market index is expected to be upgraded to emerging market indices starting in March 2019 in five stages ending in 2020 with the FTSE Russell index.

   

This article was first published in Al Arabiya English  

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Brands are mining social media to engage the Saudi market

Time : August 07, 2018

Saudi men explore social media on their mobile devices as they sit at a cafe in Riyadh. (AN file photo)

LONDON: Companies using social media to engage with Saudi consumers are calling on the services of monitoring platforms to tap into their target markets.

Saudi Arabia is more active on social media than any other country in the Middle East and brands harnessing Twitter, Snapchat, Facebook, Instagram and other platforms are investing in data that offers a deeper insight into the forces that drive Saudi spending.

According to Dubai-based social media monitoring start-up Crowd Analyzer, Saudis are especially active on Twitter and Snapchat and the country has around 16 million and 12 million users on Facebook and Instagram respectively.

The company, which has gathered real-time information from conversations surrounding major events including the World Government Summit, Dubai Lynx and Cannes Lions, recently secured pre-Series A funding of $1.1 million from a group of venture capital firms, including Wamda Capital, Arzan Capital, Faith Capital, and Raed VC.

Brands realize the huge potential of accessing the lucrative Saudi market via social media and are looking to increase their understanding of the Saudi consumer, Crowd Analyzer CE0 Ahmed Saad told Arab News.

The company, which specializes in Arabic-focused social media monitoring, analyzing content using groundbreaking technology including AI, proprietary machine learning and natural language processing, has clients in about 10 countries but Saudi Arabia is its largest market.

“Our use of AI and machine learning enables us to better monitor social media and mine data, providing brands and organizations with the most up-to-date and relevant insights,” Bahaa Galal, CTO and co-founder of Crowd Analyzer, told Wamda.

The investment will be channeled into increasing its presence in the Saudi market and opening new offices in Riyadh to connect with clients on the ground there.

Saad, who co-founded the company with Galal in 2014, said that brands and people are increasingly connected over social media in the Kingdom.

Social media culture is “booming” in Saudi Arabia, he added, explaining that more and more companies now liaise directly with consumers over social media platforms.

“It’s all about understanding people’s opinions about the product and the brands themselves,” Saad added.

One Crowd Analyzer client — a major ride-hailing company — uses the platform to gain a sense of how users are talking about the service in different countries across the region, focusing in particular on what people say about their pricing, the technology behind the service and the quality of the service itself.

As a result, brands are increasingly taking their social media campaigns in-house rather than sourcing the process out to agencies, Saad said. “This is amazing for us because it opens up a bigger market,” he added.

The company only uses publicly available data and its technology does not access information sent over private messenger. In general, he said, when people in the Kingdom voice their opinions about a brand, service or events over Twitter or Facebook, they want audiences to listen. “Saudis like being heard on social media,” he said.

This article was first published in  ARAB NEWS

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Saudi stock market basking in global investor interest

Time : July 29, 2018

Saudi Arabia’s Tadawul stock exchange is attracting increased interest from international investors. (Reuters)

  • Saudi share index gains 17 percent this year
  • Overseas interest fueled by string of upgrades

DUBAI: Is the Saudi stock market in the middle of a spectacular bull run? Some leading market experts think so.

Analysts at Jadwa Investments, the Riyadh-based financial group, believe it “totally plausible” that the Tadawul All Share Index (TASI), the main equity performance measure in the Kingdom, could be set for a 20 percent rise between now and early 2019, lifting it above the 10,000 point level for the first time since the heady days of 2014, before the oil price collapsed. It currently stands at around 8,400 points.

That would top an already strong performance in the first half of this year, boosted by inclusion in the top-three emerging market (EM) indices. The TASI is 17 percent ahead already this year, making it one of the best performing markets in the world, and the leading market in the Gulf.

All the signals have been pointing in the right direction so far in 2018. The oil price has resumed an upward path, the non-oil economy has reacted positively to an expansionary fiscal policy, and the regulators, led by the Capital Market Authority, has seen through a program of reform aimed at making Saudi Arabia more attractive and welcoming to foreign investors.

Global investors are buying into the Saudi story.

Jadwa said in a recent report: “We believe growing confidence in the nature and direction of structural economic reform, instituted as part of the Kingdom’s Vision 2030, has provided the backdrop to facilitate such sizable investments into the Saudi Stock Exchange.”

This new-found confidence was reflected in the decision by the three main global equity index providers to upgrade Saudi Arabia to emerging market status, alongside such economic powerhouses as China and India.

First FTSE-Russell awarded EM status in February, and S&P similarly upgraded last week. Sandwiched in between those was the “big one” — the move in June by MSCI to award EM ranking. Those accolades followed three year’s of hard work by the Tadawul and the CMA to make the biggest Gulf market also one of the best run and regulated.

EM status makes a big difference to global investor sentiment.

“We expect active investors benchmarked to MSCI EM to start entering the market prior to actual inclusion, which is expected to drive TASI performance even higher, similar to patterns observed with other regional equity markets prior to MSCI EM inclusion,” it added.

The Riyadh market performance has been all the more impressive in light of a growing aversion by global investors to EM destinations. Many big economies, like Russia, India and Nigeria, have seen net outflows so far in 2018, Jadwa said, while inflows to countries like Mexico, China and Brazil have been proportionately lower than into Saudi Arabia.

Furthermore, the experience of other regional markets — in Dubai and Abu Dhabi — of EM inclusion suggests that the best is yet to come for the Kingdom. Both saw significant rises after the announcement of inclusion, before trading actually commenced on the new status. Saudi Arabia will become a fully tradeable EM market in stages by the end of next year.

Jadwa’s position at the heart of the Riyadh financial hub gives its optimism some authority, but other analysts injected a note of caution into their forecasts.

ason Tuvey, Middle East analyst at London based Capital Economics, said that the surge of interest in Saudi Arabia as a result of the EM upgrades was only likely to be temporary, and that previous revival of foreign interest in Riyadh as an investment destination — as when foreign investors were first allowed to own shares in 2015 — had proved to be a false dawn.

Tuvey added that other factors would remain more important in determining global investor attitudes. “Historically, given the economy’s heavy dependence on oil revenues and the large proportion of petrochemical companies that make up the stock market, the Tadawul has closely tracked swings in oil prices,” he said.

With the future course of oil prices uncertain in view of regional geopolitical and global economic factors, Tuvey predicted a fall in the TASI of around 6 percent by year end.

Nasser Saidi, former chief economist of the Dubai International Financial Center and now an independent economics consultant, also sounded a note of caution. “The volatility of oil prices still dominate the performance of the economy, budget and the current account. This has meant macroeconomic uncertainty, accompanied by uncertainty surrounding policies in response to the fall in oil prices. In turn this means that investors whether domestic or foreign are in a ‘wait-and-see’ mode,” he told Arab News.

“Geopolitics, with ongoing wars in Syria and Yemen, and sanctions on Iran are negatively affecting investor sentiment, and Trumpian trade wars that can derail global economic growth, recovery in Europe and disrupt trade. In turn this affects the oil price and Saudi exports to China and other Asian countries,” he added.

He also warned of an after-party effect from soaring share prices. “The evidence also suggests a negative effect on the market on the actual event of reclassification, with prices falling. This involves investors speculatively bidding up securities prices and returns, before the actual reclassification event, in the expectation that foreign investors will be entering the market, resulting in prices falling following the actual reclassification event.

“Exuberance and market hype accompanying market reclassification can lead to asset price bubbles,” he added.

Foercasting the financial markets is a hazardous affair, but for now Saudi Arabia is basking in the limelight of being one of the world top equity investment destinations.

This article was first published in  ARAB NEWS

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52 Saudi Firms See 13.6% Rise in Profit

Time : July 28, 2018

An investor walks past a screen displaying stock information at the Saudi Stock Exchange (Tadawul) in Riyadh, Saudi Arabia. Image used for illustrative purpose. REUTERS/Faisal Al Nasser

Riyadh – Shujaa al-Bogmi
Fifty-two Saudi firms listed in the local market revealed their fiscal results for the first half of 2018, revealing a 13.6 percent growth in profits, which will increase the power of the local financial market.

The companies achieved SAR38.2 billion (USD 10.1 billion) profits during the first half of the year compared to the same period in 2017, while the majority of these profits come via the banking sector and petrochemical industries.

This comes at a time when the rest of the companies are anticipated to reveal their fiscal results within the coming days. SABIC, one of the world’s biggest petrochemicals company, is expected to announce its fiscal results of the second quarter on Sunday.

These updates come at a time when S&P DJI announced that it was upgrading the Saudi financial market to an emerging market.

Saudi stocks that are currently part of the S&P Saudi Arabia BMI will initially be eligible for phased inclusion in the S&P Global BMI, S&P Global BMI Shariah, S&P/IFCI Composite, Dow Jones Global Index and Dow Jones Islamic Market World Index. Eligibility for inclusion in other S&P DJI index families will begin in September 2019.

The Kingdom had recently introduced a number of key steps aimed at developing the financial market and increasing its chances of being listed among the global market indices. It also recently decided to ease restrictions for foreign capitals in addition to applying the international accountability standards.

This article was first published in  Asharq Al-Awsat

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BlackRock boss remains bullish on Saudi Arabian market

Time : July 16, 2018

NEW YORK, NY – NOVEMBER 09: Larry Fink speaks onstage at The New York Times 2017 DealBook Conference at Jazz at Lincoln Center on November 9, 2017 in New York City. Michael Cohen/Getty Images for The New York Times/AFP

LONDON: Larry Fink, the head of the world’s biggest asset manager, is confident about the future of the Saudi Arabian market following a visit to the
Kingdom.
Fink, CEO of BlackRock, said that he was “more excited about the opportunity” in Saudi Arabia following his visit.
He added that he would not be surprised to see an initial public offering of Saudi Aramco in some form next year, perhaps on the Saudi stock market, known as the Tadawul.
He was speaking on the day Black Rock reported smaller demand for its funds on Monday, and its stock dropped despite a better-than-expected quarterly profit. Net income attributable to the company rose to $1.07 billion in the second quarter, up more than 25 percent from $854 million a year earlier, Reuters reported.
The company faced a difficult market during the quarter, reporting an industrywide slowdown in the demand for exchange-traded funds (ETFs).
The BlackRock CEO said he would not be surprised to see an initial public offering of Saudi Aramco in some form next year.

 

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