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Unveiling The Latest Emerging Market

 Most MSCI Emerging Markets Index new comers tend to be quite small versus other emerging countries. Saudi Arabia, on the other hand, is a more mature market whose entry into MSCI’s indexes was historically blocked by a lack of access to foreign investors, and not a lack of investable names. Accordingly, it’s quite large, with a value of shares traded of 475.58 billion SR constituting 171 stocks as of June 28, 2018.

This Year is set to be a significant year for the Saudi Arabian financial market, not least of which was the recent announcements that the Saudi Stock Exchange, also known as Tadawul, is to be promoted to ‘emerging market’ status by the FTSE Russell and MSCI.

Saudi Arabia has a strongly oil based economy over which the Saudi Arabian Government exercises considerable control. One item of note is that the Saudi government has launched an ambitious socio-economic plan to shift the Saudi economy away from oil products known as Vision 2030. This plan aims to increase growth in the private sector and offers opportunities in various areas including:
  • Developing Saudi Arabia’s capital markets
  • Providing affordable housing to citizens
  • Building a renewable energy sector
  • Attracting greater foreign direct investment
  • Privatising numerous government entities
  • Expanding the information and communication technologies (ICT) sector
  • Developing the mining sector further
  • Increasing development of the railway and public transportation services
  • Growing a domestic tourism infrastructure
  • Increasing petrochemical and natural gas production 

last year’s budget was by far the largest in terms of revenue and spending. Governent Spending is projected to rise to 1.106 trillion SR ($295 billionUSD) this year, up from an actual 1.030 trillion SR last year, Minister of Finance Mohammed Al-Jadaan said at a briefing in Riyadh. 

The budget estimates a 9 percent annual increase in revenues to 975 billion SR. The budget deficit is forecast at 131 billion SR for this year, a 4.2 percent decline on 2018. 

The government credit rating is showing great resilience to unstable oil prices. On March 7 Moody’s agency categorized Saudi Arabia Government Credit Rating as “A1”.  The agency expects the government’s plan to diversify away from dependence on oil revenue to contribute in medium to long-term growth.


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