Emirates NBD Asset Management Sees Significant Growth Opportunities for Saudi Arabian Equities

15 January 2017
Emirates NBD Asset Management Sees Significant Growth Opportunities for Saudi Arabian Equities
  • Increased investment in Saudi Arabian equities will form part of Emirates NBD Asset Management’s global offering
  • Market capitalisation of the Saudi Arabian stock market is ranked 22nd globally and is poised for inclusion in the MSCI Emerging Markets Index
  • Government economic reforms and oil price stabilisation reasons for optimism among investors in the Kingdom

Dubai, United Arab Emirates, 15th January 2017: Emirates NBD Asset Management has identified Saudi Arabian equities as an area of strategic focus due to the significant growth potential. Through its MENA Equity funds, Emirates NBD Asset Management already provides exposure to the Kingdom, offering global expertise to the Saudi market by virtue of its established track record of investing in that market.

Through its MENA funds, Emirates NBD Asset Management is targeting medium to long term capital growth in the Saudi market. Furthermore, the firm is actively seeking additional opportunities and will drive the development of new products specifically tailored for the Saudi market.

Yong Wei Lee, Head of Equities, Emirates NBD Asset management, said:

“The potential for investment in Saudi Arabia over the coming years is huge. Government initiatives and its Vision 2030, in particular, indicate a clear appetite for foreign investment and an effort to diversify the economy: in itself an opportunity for Emirates NBD Asset Management and our partners. An upgrade to the MSCI Emerging Market Index is a clear goal of the stock market regulator, which would instantly boost Saudi Arabia’s potential. This combined with the stabilisation - or possible increase - in oil prices from 2017 onwards, all contribute to a sense of optimism and improved investor confidence.”

Potential growth in Saudi Arabia is partly the result of government initiatives to stimulate the market for the years ahead. In response to declining oil prices, the Saudi government launched its Vision 2030 plan to diversify the economy, increase foreign investment - highlighting clear opportunities for Emirates NBD Asset Management - and rationalise fuel subsidies. As a result, the government expects to lower the breakeven oil price for fiscal budgets down to $60 - 65 per barrel possibly as early as 2020.

In the long term, cost efficiency measures introduced by the Government will also result in a sustainable growth profile to the benefit of the country.

Saudi Arabia currently ranks as the 22nd largest stock market globally by capitalisation - similar to other large emerging markets - and the potential inclusion in the MSCI Emerging Market Index are other reasons for optimism. The Saudi QFI program is already implemented and a potential upgrade could occur by mid-2017/18. When UAE and Qatar were upgraded to the index these markets appreciated by over 50% 18 months prior to the upgrade, suggesting attractive returns for Saudi Arabia when it enters the index, potentially starting with a 2% weighting.

Tariq Bin Hendi, CEO at Emirates NBD Asset Management, concluded:

“The focus on Saudi Arabia is also part of Emirates NBD Asset Management’s expansion of its global offering, particularly across the Emerging Markets. These markets offer institutions many opportunities for strong risk-adjusted returns, as has been evident through our historical exposure to the Saudi Arabian market. As experts in the region and by building upon our existing MENA Equity funds, we look forward to developing new products for this hugely exciting market, particularly through equities, and delivering attractive results for investors.”

Saudi Arabia is just one of a number of emerging market opportunities that Emirates NBD Asset Management are confident about. Emirates NDB Asset Management has an increasingly global offering as part of its overarching strategy to unlock a range of emerging market opportunities, including the UAE and India, as well as Saudi Arabia.