The chief executive of Saudi Arabia’s stock exchange predicts ownership of equities by foreigners will triple by 2022, driven by flows from index trackers, as the country awaits the listing of its crown-jewel, Saudi Aramco.
“Since we opened up the market, we wanted to make sure we have enough companies, diversified sectors and industries,” Khalid Al Hussan, CEO of the $573 billion Saudi stock exchange, said in an interview Wednesday at a conference in Riyadh. “We are ready for the Aramco IPO, but as they change their plans, it gives more time for the exchange to develop.”
Foreigners are net buyers of about $4.3 billion in Saudi shares this year, as they anticipate the upgrade of the country within emerging-market benchmarks by MSCI and FTSE Russell. International investors will double their estimated holdings to 10% of the market by 2020, rising to 15% by 2022, Mr. Hussan estimates. They were allowed to trade shares directly in Riyadh about four years ago.
The buying spree this year contrasts with a sharp sell-off by foreigners after the killing of journalist Jamal Khashoggi in the Saudi consulate in Istanbul in October, a time when funds tied to the government stepped up purchases of equities and supported the market. Now, investors including BlackRock (BLK) and Man Group are making clear they’re keen to invest in the biggest equities market of the Arab World.
“The more standardized the Saudi market to international norms, the easier it is for us all to trade,” Man Group CEO Luke Ellis said during a panel at the conference. He added that the quality of companies that have held initial public offerings in the nation has been “higher than in other places.”
Saudi Aramco, the world’s biggest oil producer, may access the equity markets “sooner than you think,” Energy Minister Khalid Al-Falih said during the conference. The IPO, previously expected for last year and later delayed to 2021, “could slip a little bit, could come forward,” he said.
Meanwhile, there are four initial public offerings scheduled for this year, which “should be one of the best in the past five” for new deals, Al Hussan said. Arabian Centres, the lifestyle mall operator part of the Fawaz Alhokair Group, is one of them and the first from the kingdom to do an offering under Regulation S and Rule 144A of the U.S. Securities Act, which is familiar to American investors.
The tech company, Al Moammar Information Systems, raised 216 million riyals ($58 million) in an offering this year and climbed 4.9% on its trading debut earlier Wednesday.