Saudi Arabia stock market: more than just oil

The US$535 billion Saudi Arabian stock market, which opens up to overseas investors from 15 June 2015, will be the seventh largest emerging markets equity market, according to emerging markets specialist Ashmore.

Ashmore head of research, Jan Dehn, said Saudi Arabia has a large and liquid market, bigger than Indonesia, Mexico or Russia. It offers petrochemicals and consumer stocks, but to access the market overseas investors will need at least US$5 billion in assets and at least five years’ investment experience, Dehn said. “Given the size and depth of the market, we expect Saudi Arabia to be included in the main EM equity benchmark indices by mid-2017, though this requires the authorities to further lift restrictions on access to the market. Should this happen, billions of dollars will flow into Saudi Arabia over the next few years, in our view. Judging by other precedents in the region, such as Morocco, Egypt, UAE and Qatar, Saudi Arabia’s market is likely to re-rate when it becomes included in EM indices,” Dehn added.

Looking ahead, Dehn said that consumer stocks and banks are attractive sectors in Saudi Arabia. “We see opportunities for consumer stocks similar to those found in some African or Asian markets, but at much more attractive multiples, because of Saudi Arabia’s very favourable demographics. The population distribution has a very low average age, which points to sustained consumer demand for years to come.”