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Saudi bourse opens doors to foreigners

Article - July 5, 2016

Qualifying investors are now able to buy up to 10% of the shares of any listed Saudi company

In June of last year, the Saudi stock exchange – the Tadawul – finally opened to foreign investors. With a capitalization of $576 billion and trading averaging of about $2.4 billion a day, it is one of the largest bourses in the world.

Long awaited by the international business community since the Tadawul was established in 1994, the move signals the determination of Saudi authorities to boost non-oil sectors of the economy with the contribution of the private sector. The new rules stipulate that qualified foreign investors with at least $5 billion in assets under management and a five-year investment record will be able to buy up to 10% of the shares of any listed Saudi company.

“This is a promising country and now that we have opened the stock exchange, there are huge opportunities for investment,” says leading Saudi industrialist, Tariq Al Tamimi, chairman of the eponymous Tamimi group – a private holding company based in Dammam.

“Saudi Arabia is very stable for business, with a comprehensive and safe regulatory environment for investors, which is why we have here some of the world’s major companies such as GE, Shell and Halliburton. They know their investment here is sound. There are massive public investments, top-notch infrastructures, and a number of free zones. Furthermore, apart from the oil, we have important petrochemical and minerals sectors. You name it, we have it.”

Indeed the Saudi market – which has grown by 50% since 2011, overtaking most stock exchanges worldwide and easily outperforming the region – offers great opportunities in diversity. Whilst other regional markets are dominated by just a small amount of sectors, mostly finance and real estate, the Tadawul is home to over 165 companies across 15 economic sectors, ranging from telecoms and retail to cement and petrochemicals.

In fact, while most associate Saudi Arabia solely with oil, energy firms are conspicuous by their absence on the Tadawul, with the top five companies coming from banking, petrochemicals, telecommunications and power.

Aside from offering diversity, Saudi’s macro-economic position is also enviable. With reserves of more than $700 biliion, the government is investing big in infrastructure development – the multiplier effects of which are creating huge benefits across the economy. Demand for services, meanwhile, is regularly outstripping supply in the retail, transportation and tourism industries, while demand for greater private investment – as well as the transfer of expertise – is obvious.

Tamimi Group, which was established in 1953 and has grown to become one of the leading diversified businesses in Saudi Arabia, with interests in the building and contracting, trading, manufacturing, catering, operations, maintenance and retail sectors, is an example of a Saudi company keen to add value to its products by bringing in high quality and professionalism from abroad. Occupying a distinguished position, thanks to strong and stable solvency and vast experience in a variety of industries, Tamimi Group has formed strategic partnerships with a number of globally renowned companies, including from the U.S. and Europe.

“We are working with almost 30 companies,” says Mr. Tamimi. “If they know there is potential and good profit to be made here, they will come. These companies are not coming here just to waste their time.”

Aside from seeking out foreign partnerships, in order to maintain its success and continue its expansion within and outside the kingdom, the group recently went through a massive restructuring plan, which has resulted in higher productivity and work efficiency. The group has also succeeded in setting up operations in several new sectors, including marine services, industrial services and power. Having recognized that good governance, general transparency, and – in particular – ongoing financial transparency are critical to long-term success, Mr. Al Tamimi also decided to apply corporate governance rules and regulations throughout the group’s companies, which include Tamimi Markets, one of the fastest-growing supermarket chains in Saudi Arabia, and Al-Tamimi Trading and Contracting Company, a leading company in a variety of fields, including industry, power, water, oil, and gas.

“This is a promising country and now that we have opened the stock exchange, there are huge opportunities for investment. Saudi Arabia is very stable for business, with a comprehensive and safe regulatory environment for investors.”

Tariq Al Tamimi, Chairman, Tamimi Group

As highly profitable diversified businesses like Tamimi Group have shown, the key message to be taken from Saudi Arabia is that huge potential remains for further investment and growth across the whole economic spectrum. What’s more, it is hoped that the opening up of the Saudi Stock Exchange will facilitate imaginative new ideas to merge with established expertise within the kingdom’s strong economic base, thus, not only maintaining long-term growth for the non-oil economy, but also further integrating the country into the global investment community.

On this note, Mr. Al Tamimi encourages more foreign investors to come to the country. “Do not listen to the media or other people who have misconceptions about Saudi Arabia. We are very hospitable and transparent. We have a lot of potential for growth, and we cannot do this alone. This is a very promising country as there are solid laws, rules and regulations, which is the most important thing for investors.”