UAE brokerages, asset managers ready for Saudi opening

The $500b equity markets would open for certain foreigners from June 15, bringing the biggest GCC market on the radar of global investors

Published: 18:01 April 19, 2015

By Siddesh Suresh Mayenkar, Staff Reporter

Dubai: Some local brokerages and asset managers are tying up with Saudi-based brokers to offer new funds to get Saudi Arabia on the portfolio of global investors.

Brokers such as MENACORP are readying to offer services, while asset manager such as Al Mal Capital may offer a new Saudi-focused fund by the end of second quarter.

“We are fully set-up to offer any service to our clients in Saudi Arabia. We already have many clients and we also have a large European Bank who will trade in Saudi Arabia through us,” Fathi Ben Grira, chief executive at UAE-based brokerage MENACORP told Gulf News.

MENACORP already has a tie-up with Aljazira Capital and Saudi Financial in Saudi Arabia.

“A lot of asset managers were not looking at GCC [markets] because they were too small without the access to Saudi Arabia. But now with Saudi markets opening up they will be interested in all GCC markets.” Grira said.

Saudi Arabia, which is the world’s biggest exporter of crude oil, contributes to about 85 per cent of the total equity markets volumes in the GCC.

“Now it would be the job of financial services firms to tell investors that while also investing in Saudi, [they should] also have a look at UAE, Doha markets. It would be a huge boost for Saudi other markets in terms of liquidity,” he added.

On Thursday, the Capital Market Authority said it had posted the draft rules, which have already been published, the regulator will come out with the final rules on May 4, and the rules will be effective June 1. The qualified foreign investors shall be allowed to invest in listed shares from June 15.

Another asset manager, Al Mal Capital is also adding another Saudi focused fund in addition to a Sariah-compliant fund with assets under management of Dh500 million, which was established in 2009. The fund is outperforming its benchmark by 6 per cent.

“Due to higher dividend yields of the regional markets, we are looking at launching of new products at the end of the second quarter. Majority of the exposure would be on Saudi markets,” said Tariq Qaqish, head of asset management at Al Mal Capital.

Valuations, liquidity eyed

Investors would continue to eye valuations of companies along with the geopolitical risks attached to the market.

“In current circumstances, foreigners would continue to look at valuations and not just buy stocks that are trading at very expensive multiples,” Qaqish said.

“The major point would be to convince investors that future growth would be as solid as in the previous years,” Qaqish said.

However, market participants expect liquidity to come over the medium to long term.

“I don’t think there would be a shift in liquidity right away, but it would create a new destination for itself,” Grira said.

The opening up of the market could act as a trigger for its inclusion in the emerging and frontier markets of the MSCI, joining the ranks of the UAE and Qatar markets, which are already a part of the emerging market index.

The inclusion could attract about $24 billion (Dh88 billion) in foreign capital.

“If they upgrade Saudi to emerging status then this would become part of the investments of all global fund managers,” Qaqish said.

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