Tadawul-listed petrochemical firms, banks, and retailers are projected to see more investments than other sectors when the Saudi Stock Exchange opens to foreign investors, Al Rajhi Capital said in a statement.
The brokerage firm said the stocks expected to benefit the most from the move include Saudi Basic Industries Corp (SABIC), Jarir Marketing Co., and Almarai Co. due to subsidized fuel costs, strong fundamentals, and transparency standards.
The investment arm of Al Rajhi forecasts trading volumes to increase in June, despite the fact that Ramadan will begin during the month. The holiday is usually the slowest month of the year in terms of trading and business transactions in Saudi Arabia and the Middle East region.
Lower trading fees, which will reach 12 basis points (bps), compared to current rates of 25 bps for swap deals, will likely reflect positively on the market.
Index compiler MSCI is likely to upgrade the Tadawul All Share Index (TASI) to emerging market status once the bourse opens to foreigners, Al Rajhi Capital added. After an upgrade, the Saudi market would bear a weighting between 1.5-2 percent, with an estimated $25 billion in cash (more than 4.4 percent of market capitalization) potentially being invested as a result.
However, the firm also pointed out that new investors might face challenges such as less variety among sectors.
Petrochemicals, banks, and telecommunications currently dominate around 60 percent of market capitalization.
Another perceived risk among foreign investors is the extent to which the kingdom’s economy is dependent on oil revenues.
Tadawul is scheduled to open to qualified foreign institutional investors (QFIs) on June 15.
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