RIYADH: Saudi Arabia’s inclusion in global equity indexes and the planned privatisation of oil company Aramco are expected to bring big inflows of overseas money into the kingdom next year. This should help Riyadh rebuild its financial reserves and fund investment plans after the 2014 plunge in oil prices that cut export earnings and deprived the banking system of funds. Reversing the trend would shift the outlook for an economy which shrank last year for the first time in nearly a decade. The interest rate swaps market, which bankers use to hedge against future fluctuations in money flows, has begun to reflect these expectations in recent weeks. The one-year riyal IRS has sunk below the one-year U.S. dollar IRS for the first time since the global financial crisis at the start of this decade – a bet that the Saudi money market will be flush with funds in 12 months’ time.
“It’s quite a change — before, the issue was a shortage of liquidity. We now face a situation in which we’re about to have too much liquidity,” said Hans-Peter Huber, chief investment officer at Riyad Capital, a top Saudi investment bank.
