Opening of Saudi stock market to foreign investment creates opportunities: SEDCO Capital

Since 1976, SEDCO Capital has offered Shariah-compliant investment management and services from its headquarters in Saudi Arabia. The firm is now recognized as a leader in Islamic finance.

Yazan Abdeen, lead fund manager for MENA Liquid Assets with the company, gave an in-depth interview to Gulf News Journal on the upcoming opening of the Saudi stock market to foreign investment.

Like other firms involved in managing investments in the Tadawul, he said investors will be well-served by working with local financial firms when the market opens. He notes the locally based asset managers have lengthy market experience, and an edge in business intelligence and connections that will prove invaluable.

“We believe that regional private investors and international institutional investors have a common interest in directing their Saudi allocation towards locally based asset managers,” he said. He noted that his firm has been working toward making the investment process easier for foreign investors, and working to demystify the process for those with little experience in the region, or with Shariah-compliant investments.

The opening of the Tadawul will present advantages to both outside investors, and to the country, Mr. Abdeen said. For current investors in the market, it creates a cheaper method that eliminates the counter party risk to invest in the market; and for potential investors, the move creates “further awareness about a market that is more sizable and more liquid compared to many of its emerging markets peers,” he said.

Abdeen offered some further insight into how the move to diversify the stock market will help the economy of Saudi Arabia. He said the move might pave the way for an easing of government control of the oil sector.

“Currently the government is the primary and almost exclusive investor in the oil sector,” he said. “Private investments are mainly directed into non-oil all across the GCC and particularly in Saudi Arabia, UAE and Kuwait. The optimal opportunity, in my opinion, is liberate and privatize the oil sector for private investments to flow into it.”

The government of King Salman bin Abdulaziz Al-Saud would then best be served by diversifying the proceeds of these privatizations into counter-cyclical sectors.

He said this diversification is sorely needed – 91 percent of all government revenues in Saudi Arabia are derived from oil industries.

“Albeit this is easier said than done,” Abdeen said, “We believe that the most optimal method … is to partially divest the government’s oil interest and direct those proceeds into investing in defensive sectors.”

SEDCO Capital manages assets in a diversified spectrum of investments in real estate, equities and other businesses, with interests spread throughout the world. SEDCO Capital is a wholly-owned subsidiary of Saudi Economic and Development Company, SEDCO Holding. The company has offices in Riyadh and Jeddeh.