DUBAI: The CEO of the Saudi Stock Exchange (Tadawul) said it has “a good pipeline” of initial public offerings (IPOs) in the coming months, and is ready to stage the biggest of them all, that of Saudi Aramco, whenever the government decides to launch it.
Speaking exclusively to Arab News as Tadawul marked its full inclusion in the MSCI index of emerging market (EM) bourses, Khalid Al-Hussan said: “Taking into account all the pressures that EM markets around the world are facing, we feel we’re in good shape, and we see a good pipeline of IPOs coming through.”
On the Aramco IPO, preparations for which have accelerated in recent weeks, he said: “We confirm our readiness for Aramco, but we’re still waiting for the final decision by the issuer. They’ll share with us the plan, but we’re still waiting for more clarity.”
Saudi Arabia's transport minister, Nabeel Al-Amudi, was appointed to the Aramco board, Saudi Press Agency reported on Tuesday. It followed the appointment of Yasir Al-Rumayyan, head of the Public Investment Fund, as chairman of the oil company.
News that the Kingdom was to be included this year in the MSCI index meant that many global institutions rushed to buy Saudi stocks, leading to an inflow of $18 billion to the Kingdom and a big jump in Tadawul, up as much as 19 percent earlier this year.
But the pace of foreign investment has fallen since investing institutions satisfied their requirements in Saudi markets, and the percentage increase for the year is now in low single digits. On Tuesday, the TASI index closed at 7,924 points, compared to 7,798 at the start of the year.
Tarek Fadlallah, CEO of Nomura Asset Management in the Middle East, said: “While Saudi Arabia’s inclusion in the global indices is positive, it provides no guarantees about the market’s performance in the future, and leaves it vulnerable to shifts in foreign investor sentiment.” Al-Hussan is determined to maintain the attraction of Tadawul for new foreign investors. “We started, with the beginning of our communication with international investors two years ago, to be visible and educate international investors about the market and what’s coming, and how do we handle their investments from a practice perspective.”
He added: “We gained the confidence of international investors through this, and through the MSCI inclusion. We continue that dialogue, both ourselves and Saudi corporates, in front of international investors through different channels, to educate them about changes and practices.”
Al-Hussan said: “We need to continue to enhance our offering activity, whether these are products or services we need to introduce and compete with other markets, as well as more companies. Certain investors invest in different sectors, so we continue to understand these types of investors and bring more diversified offerings to the market.”
Among these offerings will be new IPOs. “If you look at the IPOs that have come to the market this past year, I believe that their success was mainly focused on introducing new sectors. Our role is to continue that dialogue by opening more sectors to the market,” he said, hinting at new offerings by educational and service companies.
Both Tadawul and its regulator, the Capital Markets Authority, are studying applications from new issuers. “The readiness of an application differs from one issuer to another. Some are in advanced stages, some will need more time. But that gives us a good comfort level about the health of the pipeline,” Al-Hussan said, adding that he is happy with the level of retail investor involvement in the market. Some analysts have pointed to a decline in trading activity by non-institutional investors. “If you look at regional markets or EM liquidity over the last two years, we’ve seen strong pressure on liquidity in these markets. If you compare this liquidity in the Saudi market — we announce this liquidity every Sunday — I believe that we’re still at a good level,” he said, citing a daily average of $1 billion worth of shares traded.
“But of course we’ll continue to offer more products, more regulatory frameworks to continue to gauge that interest by retail investors, which is an important and positive element of our market liquidity.”