Tadawul reforms ‘will promote liquidity, best practices’

The opening up of the Saudi stock market (Tadawul) to international investors is a “game changer” for the region, says Zak Hydari, chief executive, EIIB-Rasmala.
“It will lead to greater capital flows from international investors and drive growth in the Saudi equity market, bringing more liquidity and greater market efficiency, and promoting world’s best practices,” Hydari told Arab News in an interview.
Hydari expressed the view that Islamic assets, which now exceed $1 trillion, will continue to grow.

These are highlights of the interview:

Q: What is EIIB-Rasmala’s strategy for the Saudi market?
A: One of the key thrusts of our new strategy for the Saudi market will be to introduce a suite of new Islamic asset management products in partnership with local banks and insurance companies. We believe these new products will offer investors a greater choice of new and innovative Shariah-compliant investment products and opportunities that have not been offered previously. Our suite of Islamic asset management products includes equity, sukuk, leasing, trade finance and real estate, and we will gradually introduce more diverse products with our local partners.

Q: What is the scope of your financing activities?
A. We are seeing an increase in financing activities, from mid-market to large cap, and we possess a particular specialization in arranging Shariah-compliant forms of structured finance for growth companies.

Q: What is EIIB-Rasmala’s client base in the Kingdom?
A: We have a number of Saudi shareholders who often co-invest with us in investment opportunities outside of the Kingdom such as the Middle East and North Africa (MENA), the UK and the United States. They also offer us a great insight into what Saudi investors are looking for.

Q: What opportunities do you see in Saudi Arabia after opening up of Tadawul to foreign investors?
A: The opening of the Saudi stock market is a game changer for the region. It will lead to greater capital flows from international investors and drive growth in the Saudi equity market, bringing more liquidity and greater market efficiency, and promoting the world's best practices.

Q: Do you think regional conflicts dampen investment mood?
A: Some international investors may restrict or hold back on their investment activity. However, on the contrary, regional firms like us have been investing in the region through various conflicts and regional turbulence, and we continue to have conviction on the back of strong underlying fundamentals, particularly in markets such as Saudi Arabia, the UAE and Egypt.

Q: How can Saudi Arabia attract more capital?
A: Saudi Arabia does not have any short-term capital requirements and does not need to attract capital. Initially, the opening of the market is more beneficial to international investors who will gain access to one of the largest and most attractive growth markets in the world.

Q: How do you see the growth and expansion of Islamic banking globally?
A: Islamic assets now exceed $ 1 trillion and will continue to grow. However Islamic assets under management are a mere $60 billion and the challenge facing our industry is to convert deposits and unmediated assets into more discretionary mandates and managed funds. This is one of the key challenges to creating substantial growth and momentum for the industry globally.

Q: What is the total value of client assets under Rasmala’s management?
A: EIIB-Rasmala’s assets under management stood at $1.11 billion as of the end of the last financial year and total investable assets are approximately $1.35 billion. We expect to see significant funds growth in the next 24 months.