The biggest oil exporter in the world, Saudi Arabia will probably start allowing the foreigners to directly invest in the stocks right in 2014, as stated by the founder of the renowned Hedge Fund Passport Capital, John Burbank. Burbank added that Saudi Arabia is one of the most favorite emerging markets for many investors and hence, if this decision is ultimately taken, that is bound to be fruitful for many foreign investors who are looking for new areas to put their money into. Incidentally, Passport has around 17% of its total capital invested in the benchmark gauge of Saudi Arabia, the biggest bourse of the Arab world.
According to Burbank, the direct foreign investment in the Saudi stocks, if it indeed materializes, will attract at least $25 billion worth cash inflows. The kingdom of Saudi Arabia has already stated that they will start opening up the market gradually for everyone and currently the non-resident foreigners are allowed to invest in the Saudi based shares. However, they can only use exchange traded funds and equity swaps for doing so.
In an attempt to boost the non-oil economy of the country, the Government has already taken a spending plan of over $500 billion. MSCI Inc., which tracks most of the emerging market shares, incidentally, stated that it will consider inclusion of Saudi Arabia in its list if the country decides to allow foreigners direct access in the share market of the same. Incidentally, MSCI, in 2012, resumed its coverage of Saudi Arabia.
Passport Capital saw a rise of 3.4% in January and according to Burbank, the focus is on the domestic economy of Saudi Arabia now. He added that the Saudi Arabian kingdom is now taking huge revenue and putting the money into the domestic market for boosting the same. In 2012, the economy of this Asian country rose by 6.8% and it also increased the target expenditure of 2013 by to a record 820 billion Riyals. The growth was more than the initial forecasts of analysts set at 5.6%. According to Burbank, such a growth is kind of extraordinary, if current global economic situation is considered.
Total market capitalization of Saudi market is at 1.44 trillion Riyals currently and it is only $308 billion for Turkey and $120 billion for the United Arab Emirates; total yield of Saudi is 3.5%.