• Home
• /
• Business

Saudi Arabia seeks FDI rise

"This anticipated increase in FDI is likely to be driven by the opening up of key sectors like petrochemicals, telecommunications, power, mining, infrastructure and the development of six economic cities across the country," he said.

According to him, the continuous efforts of the government to diversify the national economy and increase the contribution from the non-oil sector are paying off. Despite high oil prices and increased revenue, the share of the oil sector has been averaging around 40 per cent of Saudi Arabia's GDP.

"This diversification has reduced Saudi Arabia's investment risk and has been confirmed by Standard & Poor's recent revision of the country's sovereign rating," he observed.

On July 16, Standard & Poor's raised its foreign and local currency long-term sovereign credit ratings on the kingdom to 'AA-' from 'A+'. The country's outlook is stable.

Mahmood also noted that with a GDP of SR1.296 trillion ($345 billion), Saudi Arabia is the largest economy in the GCC region and has the largest stock market in terms of market capitalisation. As of June 30, 2007 the kingdom's stock market capitalisation stood at SR1.111 trillion, or a shade over 36 per cent of the Gulf Cooperation Council's (GCC) total market capitalisation.

He said that after hitting a record high of 20,634.86 points in February 2006, the Tadawul All-Share Index (TASI) has lost more than SR1.96 trillion in market capitalisation over the last more than one-year. In 2006, the TASI declined 53.26 per cent, making it the worst performer in the region.

In the sixth quarter of the bear market, he continued, many investors remain on the sidelines, trading volumes have declined as has the value traded and that market valuations are reasonable.

From an investment perspective, he said the Saudi equity market is starting to look attractive.

"There is much to look forward to. Initiatives are being undertaken to improve investor confidence and market microstructure. The securities market regulator, the Capital Market Authority, is striving to bring new products to the financial market, improve transparency, enhance disclosure and corporate governance standards."

The stock exchange is also working on launching a new trading platform and introducing new trading products to the market.

The number of listed companies has gradually been increasing. Currently, there are 98 stocks that trade on Tadawul. Last year, 10 new stocks were listed on the stock exchange while 18 new companies had IPOs up to the end of the second quarter this year.

"Based on the strong economic fundamentals, sound government policies, positive macroeconomic factors and current levels of the Saudi stock market, we remain optimistic on the outlook for Saudi equities," Mahmood said.