2024-02-21 16:30:21
Hermes to Asharq Al-Awsat: The non-oil sectors in Saudi Arabia are attractive to foreign investment
The Saudi financial market has the capabilities that qualify it to double the number of foreign investors, at a time when all non-oil sectors represented in the market have witnessed large investments from foreigners.
This was announced by the head of the research department at the EFG Hermes Financial Group, Ahmed Shams, in an interview with Asharq Al-Awsat, on the sidelines of the “Saudi Financial Market Forum 2024”, which was held over two days in Riyadh.
Shams explained that one of the most important components that distinguishes the Saudi financial market is the availability of liquidity, explaining this by the fact that all economic sectors are represented in the market in one way or another. He pointed out that the recent participation of foreigners has made the Saudi market one of the most important emerging markets in the current period.
Last November, the Saudi Capital Market Authority announced that the value of foreign investors’ ownership in the financial market had grown, from 2018 until the end of 2022, by 300 percent, to reach 347.01 billion riyals ($92.5 billion). This percentage is equivalent to 14.2 percent of the total value of free float shares in the main market.
Attractive sectors
In addition to the energy sector, Shams stressed that the banking sector in Saudi Arabia is very attractive to foreign investors. Due to the growth in the volume of lending and deposits. He said: “There are great opportunities, especially if local banks in Saudi Arabia begin to diversify their sources of financing.”
He added that the consumer goods sector is one of the markets that has witnessed large investment from foreign institutions, in addition to non-oil facilities that include water and electricity, describing it as “considered very safe for foreign investors.”
EFG Hermes Group took over management of the IPO of Saudi Aramco, AquaPower, and Americana in the Saudi market with large coverage ratios (Asharq Al-Awsat)
He continued that the size of the Kingdom in the MSCI Global Emerging Markets Index represents about 4.5 percent, which is a very large number, and he stated that daily trading by foreigners represents 15-20 percent of total trading. He explained that the weight of the Saudi market begins to rise in the index when foreign ownership increases, expressing his belief that there is a high chance that their ownership will increase to about 3 or 4 times the current value.
MSCI Emerging Markets Index is a global provider of equity funds, fixed income, hedge fund market indices and multi-asset stock index analysis tools. The Kingdom represents 4.5 percent of the index, noting that its level rose from about 1.5 percent when it was included for the first time during 2019.
interest rates
Regarding the impact of the expected reduction in interest rates on foreign investments in the Saudi market, the director of the research department said: “It will be positively affected… The most affected sectors are the banking sector, in addition to the sectors that are currently expanding, including the logistical, technological and industrial sectors, which will benefit from the reduction in the cost of credit.” ».
In the event of a delay in lowering interest rates, he says: “We saw what happened in the currencies of emerging markets that do not export commodities, as they faced a significant decline and major fluctuations in the current balance of most of its markets. As for Saudi Arabia, it is distinguished by the fact that its currency price is tied to the dollar and does not change, and therefore it will not have a major impact on market, but it may delay some of the funds and investments that we expect.”
The Saudi financial market is anticipating 57 new IPOs this year, according to what the Chairman of the Board of the Capital Market Authority, Muhammad Al-Quwaiz, announced on Monday.
Shams confirmed that there are IPOs that the company is preparing for, refusing to disclose their details. He added that the company is “a major player in all IPOs in Saudi Arabia, Kuwait, the UAE, and the Middle East region in general.”
It is noteworthy that the “EFG Hermes” group managed the IPO of the companies “Saudi Aramco”, “AquaPower”, and “Americana” in the Saudi market, with large coverage ratios.
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