Saudi Market Opening Will Take Time To Boost To Local Managers – Jadwa CEO

Saudi investment firms are unlikely to see immediate benefits from the opening of the kingdom’s stock exchange, the chief executive of Jadwa Investment told Reuters, with the company seeking business with regional institutions in the meantime.

Authorities in Saudi Arabia released rules on Monday to govern qualified foreign investors wishing to buy into the Arab World’s largest bourse when it opens to direct international participation for the first time on June 15.

However, they have been eager to emphasise this is not an exercise in attracting large amounts of cash to the $568 billion market but instead to bring institutional funds in to provide stability and improve corporate governance.

Jadwa, Saudi’s largest private investment firm, expects inflows to reach between $40 billion and $50 billion in the medium to long term, although much of this cash will not be seen until the kingdom is included in indices such as the MSCI Emerging Markets index — not likely until at least 2017.

“It’s very difficult to predict inflows in the immediate term,” Tariq al-Sudairy, chief executive of Jadwa, told Reuters in an interview on the sidelines of a financial conference.

Jadwa hopes to leverage its on-the-ground expertise to attract foreign investors to invest through it, becoming the “channel of choice” especially for those funds that choose to enter new markets through a local partner.

The firm has already held conversations with international investors about investing in Saudi, Sudairy said, but he added it would be “multiple months” of talks before the firm would see any investment as these institutions do a lot of due diligence.

“We don’t necessarily expect anything to immediately hit our books but we certainly hope, in the next two years, we will get our fair share of inflows,” he said.

In the meantime, Sudairy said Jadwa was “selectively and opportunistically” approaching regional institutions about investing in Saudi, given they are already familiar with the kingdom and can access the market even before the official opening next month.

Jadwa has around 20 billion riyals ($5.3 billion) of assets under management across its product range, which includes asset management, private equity and investment banking.

It hoped to complete its second private equity investment of 2015 in the second half of the year, Sudairy said. He said the firm was looking at opportunities in the industrial, retail and food sectors.

Along with Arab Petroleum Investments Corporation (APICORP), Jadwa purchased a majority stake in Saudi Mechanical Industries in March.