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Saudi economic reforms to strengthen capital markets: expert

Xinhua, May 9, 2016 Adjust font size:

Replacing the Saudi longstanding Oil Minister, Ali Al-Naimi with Khalid Al-Falih, current Saudi Arabian Oil Company chairman, along with capital market reforms, forecast changing times in the Gulf Arab economy, said Gary Dugan Sunday, Chief Investment Officer (CIO) of Dubai's first bank Emirates NBD.

Ali Al Naimi, 80, had served as oil minister since 1995, shortly before oil prices plunged to 10 U.S. dollars a barrel in 1998.

Khaled Al-Falih, former health minister and Saudi state oil company Aramco chairman, to be partially privatized, will become minister of the new integrated cabinet resort for energy, industry and mineral resources, announced the Saudi government Saturday.

Emirates NBD CIO Dugan said in his regional capital markets weekly assessment that authorities are keen to maintain a "positive" pace of change for Saudi asset markets.

The Saudi equity market appears to be on the right track for inclusion in the Morgan Stanley Capital International (MSCI) Emerging Market Index after announcing major reforms to its capital market regulations to be implemented by early 2017, said Dugan.

In June 2015, the Saudi Capital Market Authority partially opened up the Tadawul stock exchange for foreign investors, a first in the Riyadh-based market's history.

Saudi Arabia's Gulf Arab neighbors, Qatar and the United Arab Emirates, have already seen their markets upgraded to emerging market status back in May 2014.

The most significant change, according to Dugan, is moving from the current cash prefunding requirement for an equity bargain to a two-day (T+2) settlement cycle.

"The change would align the Saudi equity market settlements procedure in line with standard international practice," he explained.

The Saudi market's plan to compete with its global EM counterparts involves allowing covered short selling aided by the ability to lend and borrow securities, enhancing custody controls and introducing proper delivery versus payment.

"Authorities have additionally declared the broadening of the market base thus reducing minimum market capitalization to one billion dollars as well as broadening the scope of entities allowed to register," according to investment banking expert, Dugan. Endit