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Saudi is looking east to unlock FDI + equity investments in the domestic economy: Tadawul is ramping up its efforts to attract equity investments from Asia, focusing on the significant potential of flows from Chinese, Indian, and other Asian investors, Chief Strategy Officer Lee Hodgkinson said on Bloomberg’s Tiger Money (listen, runtime: 38:00). These investments would not only boost exchange liquidity, but also benefit listed companies, he explained. Bloomberg also has a rundown of the podcast episode.
The rationale: Saudi’s prime location, along with favorable time zones and a fresh, no-legacy approach, positions Riyadh as an appealing partner for Chinese and Asian investors, Hodgkinson added. Despite Riyadh’s strong trade and investment ties with the US, “I think the other interesting factor is just the sort of sheer size of investment that can come from Chinese investors, from Indian investors, and from Asian investors,” he explained.
ETFs are at the front and center of Tadawul’s Asian push: ETFs “provide a really good structure” for engaging with Asia-based investors, Hodgkinson noted. “What we’ve done with our colleagues in China is to really begin the process of awakening and marketing the Saudi equity story to Chinese investors via these ETFs.”
IN CONTEXT- The Saudi exchange has nine ETFs with USD 54 mn in assets under management— two are tracking US equities, and the rest is tracking Saudi companies, Hodgkinson said. Two exchange-traded funds (ETFs) tracking Saudi stocks made their debut in Shanghai and Shenzhen last month. The China Southern Asset Management CSOP Saudi Arabia ETF QDII listed in Shenzhen after raising CNY 634 mn (USD 87 mn) ahead of listing, while the Huatai-PineBridge CSOP Saudi Arabia ETF QDII listed in Shanghai after drawing in CNY 590 mn ahead of listing.
The Investment Ministry is also hoping to lure in more money from Asia as the new investment law comes into effect, Assistant Investment Minister Ibrahim Al Mubarak said in an interview with CNBC (watch, runtime: 2:30). Despite being Saud’s largest trade partner, the Kingdom has yet to see “more on the FDI side” from China, Al Mubarak said. While retaining existing investors is a sign of confidence in the economy, the fact that they are the ones injecting the majority of our FDI figure, makes the case for the fresh investment law which looks to attract new foreign investors, he said.
Where things currently stand: FDI in the Kingdom clocked in at some USD 20 bn last year, up 150% from 2016, Al Mubarak noted, adding that studies show that some 60% of new investments are coming from already-existing investors.
Big potential for investors in the local debt + equity capital markets: Saudi Arabia’s debt-to-GDP ratio is among the lowest in the G20 and debt capital markets are “underserved,” presenting valuable prospects for private sector players in the financial sector, Al Mubarak explained. He also went on to highlight that Saudi’s equity capital market represents 78% of the region’s by volume and is the ninth globally.
