The opening up of the stock market to international investors by Saudi Arabia is a great leap forward.
Saudi Arabia is the most significant emerging market after China in terms of size, so it’s an extremely important development.
It will make the market more attractive to foreign investors as they tend to want direct access to capital markets, rather than through intermediaries.
For the stock market, this gives upward momentum towards the goal of gaining MSCI Emerging Markets status.
This will encourage more transparency and openness among corporates. Companies will continue to make progress towards more transparency and becoming more accessible, and foreign investors will require them to continue to demonstrate that. Transparency is a moving target, so continued progress will be needed.
It also gives an additional recognition to the size of the Saudi Arabian economy beyond the Middle East. It gives credit to its size and place in the larger emerging market world. Corporates now also have additional opportunity to raise money through capital markets.
This will be positive for all markets in the region, although investors will obviously differentiate between them. I expect this to be positive for markets in the short-term and it will bring additional foreign direct investment to Saudi Arabia in the form of portfolio investment.
John Sfakianakis is a Riyadh-based economic expert and a former chief economic adviser to Saudi Arabia’s finance minister
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