Saudi Arabia most attractive among emerging markets: MSCI chief

Saudi Arabia remains a "very attractive" emerging market compared to its peers, given that the economic activity is gaining ground and multiple government initiatives make it more appealing for foreign investors, Henry Fernandez, chairman and chief executive officer, MSCI Inc., the global index provider, told Argaam in an exclusive interview.

“It is a difficult environment to invest in emerging market equities, as the markets will go lower before they go higher. But relative to other emerging markets, Saudi Arabia is very attractive,” he revealed. 

“Economic activity is beginning to pick up given the higher oil prices; its currency [Riyal] is pegged to the US dollar; the economy is relatively stable on the back of oil revenues and the country is opening up to foreign investors. Hence, there is quite a lot of excitement.”

Fernandez said the reforms on the Saudi Stock Exchange (Tadawul) and overall economy were being implemented at a “very rapid pace compared to any other country in the world.”

“The pace is accelerating, and the timetable is being moved up and not delayed,” he said, referring to the launch of the derivatives market.

While the derivatives market was to be launched in the second half of 2020, the launch of the listed futures index – a part of the derivatives market – will be accelerated by about 18 months to the first half of 2019 from the second half of 2020.

“The inclusion in MSCI index came a lot earlier than anticipated, the advent of short selling and borrowing of stock came earlier than anticipated, the development of derivatives market and the development of Central Counterparty Clearing House are coming earlier than anticipated,” Fernandez said.

“So, I would like to dispel from an outsider’s perspective any semblance of slowdown… if anything this is a country in a hurry.”

On Tuesday, MSCI announced it had signed an agreement with Tadawul to jointly launch a tradeable index later this year in order to drive the growth of derivatives and exchange-traded funds in the Kingdom. Besides, Tadawul will launch exchange-traded derivatives in the first half of 2019.

When asked if the number of initial public offerings (IPOs) will increase on Tadawul in the coming months, the MSCI chief he was aware that the IPO pipeline was "very healthy," despite sluggish activity in the past year against a muted economic backdrop.

"Economic activity is picking up and so there are quite a lot of companies in the IPO pipelines and those companies are state-owned companies and private companies.”

According to Fernandez, the Tadawul is planning to unveil a significant "reach program" in order to incentivize and encourage companies to go public.

“I think they are working on a set of incentives that the government can provide in different industries for IPOs. They are also working on cultivating companies in the GCC region to be able to list here either as a cross-listing or primary listing,” he added.

Write to Reem Abdellatif at reem.a@argaam.com