Funds may bide their time on Saudi equities

Significance

The move was in recognition that recent reforms have brought the country's capital markets into conformity with the minimum standards expected by major global investment funds. However, inflows of both portfolio and direct investment have so far fallen short of expectations, although Saudi bonds have attracted interest.

Impacts

• Fund inflows into Saudi Arabia mean outflows from other indexed markets, which could be concentrated in a few countries.
• Some funds could face criticism from their investors over the ethics of holding Saudi assets.
• A deeper and more liquid equity market will help local firms raise financing and invest to grow the non-oil economy.