Saudi exchange ‘aims to dominate Arabian Gulf markets’

The Saudi stock exchange is already the biggest market in the Middle East by market capitalization and trading volumes. (Reuters)
Updated 08 February 2018
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Saudi exchange ‘aims to dominate Arabian Gulf markets’

ABU DHABI: The Saudi stock exchange, or Tadawul, aims to become the dominant market in the Arabian Gulf with further moves to encourage foreign investment, a leading forum was told on Thursday.
Sarah Al-Suhaimi, head of the Tadawul, told the Milken Institute MENA Summit in the UAE capital: “For this region to become significant in global terms there will have to be one main market and that is what we are working on. This thinking has already been happening. It is the will and intention of the Tadawul to grow itself and become the biggest stock exchange in the region.
“I also know that the Capital Markets Authority (CMA, the market regulator) has been working with other regulators in the Gulf Cooperation Council to have common regulations that would allow foreign companies to list in Saudi Arabia, or to have dual listings,” she said.
The Saudi stock exchange, based in Riyadh, is already the biggest market in the Middle East by market capitalization and trading volumes, but lags well behind others — notably the UAE stock markets — in the proportion of stock held by foreign investors.
Future inclusion in emerging markets (EM) indices, now being considered by the index compilers, would boost foreign ownership, currently a mere 1 percent of the total, she said.
Al-Suhaimi said that “everything is done” for EM index inclusion later this year. “We know because we have been working with the indices and with foreign investors.”
The coming initial public offering (IPO) of the national oil company Saudi Aramco, which is pledged to least part of its historic flotation in Riyadh, would also have a major effect on the Saudi market, she said.
Asked whether the Tadawul remained confident that it could “exclusively” stage the IPO, which could be worth up to $100 billion, she said: “We are ready and waiting for any decision the company might make, whether that’s for a dual listing with another exchange or a local listing. We are prepared to do whatever is decided.”
Achieving a unified stock exchange in the region would be a challenging process. Other GCC states have marketed themselves as “gateway” hubs for investors in the region and are likely to guard that position jealously.
The UAE, in particular, has two main equity markets — in Dubai and Abu Dhabi — around which the country has built a strategy of financial “clusters” to lure foreign investment.
But investors at the forum said the idea could work. “The UAE and Saudi Arabia have been cooperating on so much lately that this could be the next thing they do together. The pie will just get bigger with the transformation underway in Saudi,” said one banker, who declined to be named.
There was general agreement at the summit that the opening up of the Saudi economy to foreign investment would benefit the whole region. Miguel Azevedo, head of investment banking for the Middle East and Africa for American banking giant Citigroup, said that the investment climate had improved significantly. “But what we need are transactions. IPOs were almost nonexistent just a year ago. The Adnoc Distribution IPO has traded well and we need more like that.”
He said that the Aramco public offering would “massively increase awareness and the attraction of the region. It is the biggest transaction in the history of mankind.”


Tesla nears 3-month low as JPMorgan adds to private deal doubts

Updated 20 August 2018
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Tesla nears 3-month low as JPMorgan adds to private deal doubts

  • Slashing its price target for Tesla from $308 to $195, the brokerage said it did not believe Chief Executive Officer Elon Musk had funds for a plan
  • Tesla shares fell nearly 4 percent

LONDON: Tesla shares fell nearly 4 percent on Monday as a $113 cut in JPMorgan Chase’s price target for the electric carmaker added to growing doubts among market players about a plan to take the company private.
Slashing its price target for Tesla from $308 to $195, the brokerage said it did not believe Chief Executive Officer Elon Musk had funds for a plan announced by a tweet that said “funding secured” two weeks ago.
Analysts from the US bank had upped its forecast from $198 to $308 after a roughly $100 surge in Tesla stock following Musk’s tweets on Aug. 7 and the note on Monday was the latest evidence of skepticism about the deal on Wall Street.
People familiar with the matter said on Sunday that PIF, the Saudi Arabian sovereign wealth fund that Musk says had been pressing to help fund the buyout, is in talks to invest in aspiring Tesla rival Lucid Motors Inc.
“Our interpretation of subsequent events leads us to believe that funding was not secured for a going private transaction, nor was there any formal proposal,” JPMorgan analyst Ryan Brinkman wrote in a client note.
“Tesla does appear to be exploring a going private transaction, but we now believe that such a process appears much less developed than we had earlier presumed, suggesting formal incorporation into our valuation analysis seems premature at this time,” Brinkman said.
JPM now targets the stock, which it continues to value at underweight, back at $195, versus Friday’s close of $305.50. The median price target of the Wall Street analysts covering Tesla is $336.
Tesla shares touched a three-month low of $285 in premarket trading before recovering to trade around $290, reducing its market value back below that of General Motors as the biggest US carmaker.
An interview with the New York Times, in which Musk said he was under major emotional stress in the “most difficult year” of his life, on Friday added to investors’ concerns over his leadership after a series of social media spats.
A person with direct knowledge of the matter told Reuters last week that the SEC has opened an inquiry related to Musk’s tweets on the buyout and the billionaire is also facing a class action suite from investors who lost money in the share moves.
“The lack of process to (Musk’s) announcement has now caused governance and competency concerns which are starting to snowball,” said Tigress Financial Partners analyst Ivan Feinseth.