Deutsche Bank unveils first research on Saudi Arabia and launches research team in MENA region

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The team, which will publish research on companies and countries throughout the region, expects to write research on the top 50 listed companies together with regular country research, the first of which, on Saudi Arabia, is launched today. It forms part of a research franchise which is now regarded as the best across the EMEA region in external investor surveys such as those carried out by Thomson Extel and Institutional Investor, where the regional team received more than 15 first place rankings earlier this year.

Today's research, entitled 'Saudi Arabia Primer - Arabian Gold', takes a close look at all aspects of the Saudi Arabian economy, including an introduction to those companies listed on the Tadawul Stock Exchange. Some highlights reflected in the research include:


• Oil continues to dominate the $307bn Saudi economy, providing 84% of annual revenues and representing 32% of GDP.

• Accession to the WTO has added momentum to the existing agenda of economic reform. Saudi Arabia is the largest member of the GCC and the ratification of trade tariffs and the liberalization of economic sectors have been underway for more than five years.

• Within telecoms, the incumbent operator was privatized four years ago, while a second GSM licence was sold in 2004. The sale of a third GSM line licence in 2008 and deregulation of the fixed line network are planned by 2010.

• Financial services have also seen deregulation, with licences for regional commercial banks being issued. Foreign investment banks have been issued permits by the newly created Capital Market Authority (CMA).

• Corporate earnings for the listed companies have shown consistent, strong growth for the last five years. Earnings for the companies in the Deutsche Bank Saudi Index grew by 58% in 2005, and have averaged annual growth of 55% for each of the last five years. The changes in the banking sector (improved economies of scale), the telecoms sector (converting cash into regional assets) and the industrial sector (leveraging a global competitive advantage in power costs) have continued to deliver strong earnings growth.

• Creating and empowering the institutions (the CMA, telecoms regulatory authority etc) which will be required to follow through on deregulation and the further engagement of the private sector is a key challenge. The results, in turn, are likely to drive other issues such as the need for continued economic diversification and job creation.

Zahed Chowdhury, Deutsche Bank's Head of Middle East Company Research, commented: 'Record oil prices and production levels have created an opportunity in Saudi Arabia through a third successive year of budget surpluses. The money is being spent to develop industrial capacity across a number of sectors and to repay government debt and deepen investments which have in turn produced improving credit ratings. Deregulation has started to engage the private sector and produce improving foreign direct investments. All of which is necessary for a young and rapidly growing workforce.'

Stephen O'Sullivan, Deutsche Bank's Regional Head of Research for EMEA and Latin America, added: 'The Middle East is becoming an increasingly important region for the investment banking community. We hope that by developing a strong research platform in the region we can offer a comprehensive research capability to our clients both domestically and internationally.'