There was some big news out of the Middle East yesterday, but it’s probably not what you think. While everyone was looking at its neighbors, Saudi Arabia announced that for the first time ever, it is granting foreigners direct access to its stock market. Read on for a 3-point summary of why this is important:
1) Saudi Arabia is the second biggest closed market in the world (after China). How big is big? Saudi’s stock market is worth $530 billion: more than the other three open regional emerging markets—Egypt, Qatar and the UAE-—put together.
2) Saudi Arabia now plans to open its stock market (Tadawul) to direct investment by foreign financial institutions for the first time. Opening up the domestic market means Saudi Arabia could be included in the MSCI Emerging Markets Index. What does MSCI have to do with it? Saudi’s announcement could be related to the fact that it underperformed UAE (by 30%) and Qatar (by 8%) in the last year; MSCI had moved both to emerging markets this spring.
3) Why should we care? One reason is that it will bring increased foreign investment to MENA region. The Chief Investment Officer at National Bank of Abu Dhabi explained, “The big sleeping giant…is Saudi Arabia, a well-capitalized and large market that foreigners couldn’t get access to…It’s exciting. It gives greater credibility to the region.” Other experts point out that the “government is pouring in massive amounts of money into social, civil and transportation infrastructure projects, a key driver for growth.”
Finally, all this is in the context of Saudi Arabia’s efforts to move away from oil output dependency.
And that’s #goodnews.
TJ Misra is Head of Corporate Communications at BarakaBits.
For more information: Get a light overview of what the MSCI Emerging Markets Index is, or deep-dive into the economics at the Wall Street Journal, Barrons, and Arabian Business.
