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Saudi market flirts with foreign investment

Written By | Dec 11, 2016

WASHINGTON, December 11, 2016 –  Foreign investors interested in capitalizing on the recent OPEC decision to cut oil production may want to wade into Saudi Arabia’s stock market, the Tadawul.

The announcement of the deal, combined with large mining and infrastructure contracts, has buoyed the spirits of Tadawul investors, even in the face of weak corporate earnings and relatively high PE ratios.

The expected improvement in oil prices as a result of the OPEC deal is countering gloom over potential austerity and new taxes. Analysts now opine that the oil revenue will help moderate any upcoming cuts and its impact on the Saudi population.

This bump in the exchange is good news for the few foreign investors who now can access the Saudi market. Last May, the Kingdom announced it was opening the market to foreign investors for the first time ever.

But small investors need not apply. To qualify, investors must have $5 billion in assets under management and a five year operating history.

Despite the restrictions, the move is important. Those who qualify finally can have access to this $570 billion exchange for the first time in its operating history.

The well-capitalized, highly liquid exchange gives investors a little piece of some of the blue-chippiest of the blue chips, including the world’s largest petrochemical producer, Saudi Basic Industry Corp; the investment group owned by billionaire Prince Alwaleed bin Talal Al Saud, Kingdom Holdings; and the largest Islamic lender in the world, Al Rajhi Bank.

Not to mention that Saudi Arabia’s All Share index has risen 15% since January 2015, outperforming all the major US indexes.

For Saudi Arabia, the opening brings a major cash infusion without giving away ownership in Saudi companies. It also brings them closer to the mainstream and will prompt MSCI to include Saudi Arabia in its emerging market gauge by 2017. That alone would bring the Kingdom $40 billion.

While not for the faint of heart – or the faint of bank account – the Saudi stock market provides some interesting opportunities not available anywhere else. And now, for the first time ever, foreign investors have entree.


Lisa M. Ruth

Lisa M. Ruth writes on international events, intelligence, and other topics. She has worked with CDN as a journalist since 2009. Lisa is also President of CTC International Group, Inc., a research and analysis firm in South Florida, providing actionable intelligence to decisionmakers. She started her career at the CIA, where she won several distinguished awards for her service. She holds an MA in international relations from the University of Virginia, and a BA in international relations from George Mason University. She also serves as Chairman of the Board of Horses Healing Hearts, and is involved with several other charitable organizations, including Habitat for Humanity, The Boys and Girls Clubs of America, and AYSO.