MUSCAT: With Saudi Arabia opening up its shares to foreign investors, other GCC markets, including Oman, are likely to benefit with big international investors, with no prior exposure to the region, expected to be lured in by the Arab world’s biggest stock market.
“Many global institutional investors, who previously avoided the region, are likely to enter the Saudi market and expand their focus to the entire GCC region,” Ahmed Saleh al Marhoon, director general of the Muscat Securities Market, said. “This is likely to have a positive impact on regional markets, including Oman. Foreign investors always look to diversify their allocations.”
Marhoon said the MSCI’s upgradation of the Dubai and Qatar markets to emerging-market status had a positive impact on other Gulf markets, and the same is expected with the opening up of the Saudi market.
“Despite the opening up there are still many restrictions in place. Recent volumes on the Saudi market have been below expectations. The Oman market is open to foreigners and is not hampered by such restrictions. Added to that, valuations here are much more attractive than in other markets,” he added.
Dr Fabio Scacciavillani, chief economist at the Oman Investment Fund, said the Saudi market’s new status would raise curiosity among international investors for the entire Gulf region. “The region will attract more fund managers and big institutions as global interest increases. This would have a positive impact on other GCC markets in terms of foreign investments.”
“Once international investors turn their attention to a new market it is natural that they would prefer to broaden their focus. They would look out for opportunities in neighbouring markets where they have not yet allocated funds,” Dr Scacciavillani added.
Saudi Arabia requires that foreign institutional investors register with its Capital Market Authority before they can begin investing. Only big foreign financial institutions such as banks, brokerage houses and fund managers will be considered, and they need to have over US$5bn in assets and over five years of investment experience.
Kanaga Sundar, head of research at Gulf Baader Capital Markets, said the opening up of Saudi equity market, the biggest and most liquid in the GCC, is expected to attract potential large foreign institutional interest over the coming months.
“On the other hand, with the prevailing high valuations, we may not see significant flows immediately, while over the medium to long term this would remain positive for Saudi equities, which has enough room to grow. With the Saudi opening, we do also see the peripheral markets in the GCC benefitting in the form of increased institutional interest,” he said.
Joice Mathew, senior manager for research at United Securities, sees the region reaping the benefits of the Saudi opening gradually rather than quickly.
“The visibility of Saudi companies among international investors would go up further from current levels. Other regional markets should see some spillover effects of this increased visibility due to the fact that GCC economies share very closely all the major characteristics that drive their economies.”
