30/04/2015 15:22 AST
The Saudi equity market, which trades more than $2.4 billion in daily value, represents 13 per cent of emerging markets liquidity and stands to yield considerable attention from global managers, an industry expert said.
With a market cap of $535 billion, Saudi Arabia's market size is individually bigger than South Africa, Russia, Mexico and Turkey, explained Yazan Abdeen, lead Mena Fund manager and head of Mena Liquid Assets at Sedco Capital, Jeddah, a leading financial investments firm.
Saudi Arabia's stock market Tadawul, which will be open for foreign investors as of June 15, makes up 6.4 per cent of the global emerging markets’ capitalization, which stands at $8.3 trillion.
These facts, combined with the lack of currency risks, make a positive case for the Saudi market, said Abdeen.
“Albeit the fundamental appeal of the market, we believe that real value within the market needs deep research and on-the-ground positioning,” Abdeen said.
“A local team that speaks the global investment language, directed by a disciplined fundamentally-driven investment process that is stock-selection oriented in its style will have a superior investment positioning in the Saudi market."
He stresses that those who are early players are the ones to benefit the most as the market quickly earns its "emerging market status," which he estimates to take place within two years.
Global investors for the past 15 years or so have endorsed emerging markets as a core weight within their global portfolio, to augment their strategies for growth. This strategy has been hedged with emerging markets' currency volatility and/or political and governance risks. Saudi Arabia's market provides growth without the associated common currency and political risks.
Echoing this point, Bernard Caralp, CIO of Sedco Capital said: "We have understood this positioning and kept Saudi Arabia within our global asset allocation as an alpha optimizer."
"The macroeconomics strengths of the Saudi market are not fully realized and reflected in the exchange's capitalization. With the CMA announcement of market opening, our regional team has immediately become a global investment necessity," he added.
For the past five years Sedco Capital has created the infrastructure to be the asset manager of choice for global investors in Saudi Arabia, Caralp noted.
Hasan AlJabri, CEO of Sedco Capital said: "We believe that four pillars define our unique positioning; a fundamentally-driven, socially-responsible and financially prudent philosophy, a disciplined, research-based, scientific process and approach that is stock-selection focused, run by a solid team with international asset management experience with the longest top quartile track-record in the region."
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