GCC projects market shows signs of improvement: Report

In this Jan. 28, 2017 with skyscrapers along the Sheikh Zayed highway, at background, flamingoes and other birds forage for food at the Ras Al Khor Wildlife Sanctuary in Dubai, United Arab Emirates. (AP)
Updated 20 August 2017

GCC projects market shows signs of improvement: Report

JEDDAH: The Gulf Cooperation Council (GCC) projects market had a muted performance in the first half of 2017, but it is expected to perform better in the second half of the year as the region’s economies continue to adjust to lower oil prices.
According to the latest data from MEED Projects, the region’s leading projects tracking and analysis service, just $56 billion worth of contracts were awarded in the first six months of 2017 compared with $69 billion worth of deals over the same period in 2016, a 19 percent fall.
With the exception of Saudi Arabia, every country in the region experienced lower contract award values year-on-year, with the most marked falls seen in Kuwait (46 percent) and Bahrain (84 percent). Even Dubai, which has hitherto been the most robust and active of the GCC projects markets, experienced a slight dip between the two periods.
The prognosis for the second half of 2017 is brighter, however. Based on its tracker’s pipeline of projects under bidding in addition to contracts already awarded in July and August, MEED Projects forecasts a total of just $61 billion to be let in the second half of this year, a significant improvement on the first six months.
Added to the January-June numbers, the forecast for the year as a whole for the GCC is, therefore, $117 billion, roughly equivalent to the value of contracts awarded in 2016. On a country level, the UAE, led by the Dubai real estate and transport sectors, remains the largest single market with about $38 billion worth of contract awards. It is followed by Saudi Arabia at close to $36 billion and then Kuwait at $16.8 billion.
“Although market performance has been sluggish, there have been signs of a pick-up in activity,” said Ed James, director of Content and Analysis at MEED Projects. “The award of more than $5 billion worth of EPC contracts on the new Duqm refinery in Oman at the beginning of August, plus a raft of new project announcements in Dubai, and the gradual re-emergence of activity in Saudi Arabia have provided a degree of impetus that points to a strengthening market.
“There is no doubt that the past two years have been tough for the projects supply chain as government spending has slowed,” said James.
“Currently, there are over $2 trillion of known active projects in the pipeline across the GCC according to MEED Projects data. The majority of these are infrastructure schemes that are essential to the future prosperity of the region, job creation and economic diversification. While inevitably not all will come to fruition, we can be confident that there is still a large amount of work to come regardless of the oil price.”

Saudi stocks receive landmark emerging markets upgrade from MSCI

Updated 21 June 2018

Saudi stocks receive landmark emerging markets upgrade from MSCI

  • Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months
  • MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds

LONDON: Saudi Arabian equites are poised to attract up to $40 billion worth of foreign inflows, following a landmark decision by index provider MSCI to include the Kingdom’s stocks in its widely tracked Emerging Markets index.

"MSCI will include the MSCI Saudi Arabia Index in the MSCI Emerging Markets Index, representing on a pro forma basis a weight of approximately 2.6% of the index with 32 securities, following a two-step inclusion process," the MSCI said in a statement late on Wednesday night Riyadh time.

“Saudi Arabia’s inclusion in MSCI’s EM Index is a milestone achievement and will likely bring with it significant levels of foreign investment,” Salah Shamma, head of investment for MENA at Franklin Templeton Emerging Markets Equity, told Arab News. 

“It is a recognition of the progress Saudi Arabia has made in implementing its ambitious capital markets transformation agenda. The halo effect of such a move will be felt across the stock exchanges of the entire Gulf Cooperation Council (GCC).”

Market authorities in Saudi Arabia have introduced a series of reforms in the past 18 months to bring local capital markets more in line with international norms, including lower restrictions on international investors, and the introduction of short-selling and T+2 settlement cycles.

Such reforms prompted index provider FTSE Russell to upgrade the Kingdom to emerging market status in March, opening the country’s stocks up to billions worth of passive and active inflows from foreign investors.

MSCI’s Emerging Market index is tracked by about $2 trillion in active and global funds. The inclusion of Saudi stocks in the index, alongside FTSE Russell’s upgrade, is forecast to attract as much as $45 billion of foreign inflows from passive and active investors, according to estimates from Egyptian investment bank EFG Hermes. 

The upgrade announcement was widely expected by the region’s investment community, following a similar emerging markets upgrade announcement by fellow index provider FTSE Russell in March. 

“MSCI index inclusion will be a historic milestone for the Saudi market as it will allow for sticky institutional money to make an entry in 2019 which will help deepen the market,” said John Sfakianakis, director of economic research at the Gulf Research Center in Riyadh.