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SA stock market liberalisation is ‘welcome news’

Ghadir Abu Leil Cooper, Head of EMEA and Frontiers Equity Team at Baring Asset Management comments on the opening of the Saudi Arabia stock market to international investors…

This is something we have been looking for from Saudi Arabia for some time, and it’s welcome news.
It’s part of the government’s programme to diversify the economy. In the future, Saudi Arabia, as with many other Middle Eastern countries with youthful populations will face challenges. These include finding jobs for the work force, strengthening and deepening the economy, and diversifying away from hydrocarbons and dependence on government funding. To do this successfully will require attracting overseas investment, and having a fully functioning capital market goes hand-in-hand with that.
If the market is fully opened up, it should have a positive impact on corporate governance, which would, in turn, allow valuation multiples to expand. It should also allow Saudi Arabian companies better access to capital and more choices too. The ability to list and access to a broader range of funding sources should allow for a more dynamic corporate sector in Saudi Arabia.
Finally, as the financial sector continues to grow in Saudi Arabia, we will see increased use of pensions and mutual fund products as individuals save for retirement. A fully functioning equity market would clearly be beneficial for capital allocations and management of liabilities as well as estate planning.

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