American holdings company Franklin Templeton funds have recently become Qualified Foreign Investors (QFI) in Saudi Arabia. This will allow the funds to invest directly in Saudi Arabia’s stock market. With several funds having already obtained QFI status, applications for other funds are also currently under review.
The approval comes at an exciting time for Saudi Arabia as it implements a far-reaching economic transformation program aimed at stimulating growth and employment. The Kingdom’s stock market is also expected to be included in MSCI Inc.’s Emerging Market Index (MSCI EM) later this month following a similar move by index provider FTSE Russell in March.
“Having operated in Middle East and North Africa for almost 20 years, we remain dedicated to growing our business alongside the region’s growth. Saudi Arabia has an exciting investment story and we want to ensure we are part of its ambitious agenda to reform its capital market. We are carefully evaluating opportunities for deepening our Shariah business in particular, which grew 32% in 2017 and manages over $2 billion in assets. Saudi Arabia will continue to be a key, strategic market for us,” said Sandeep Singh, Regional Head of Central & Eastern Europe, Middle East and Africa and Head – Islamic Business at Franklin Templeton Investments.
Around $3 billion in foreign flows have already come into the Saudi market in 2018, taking total foreign investment in the stock exchange (Tadawul) to approximately $9 billion. Saudi Arabia’s anticipated inclusion into the MSCI EM Index is likely to bring additional flows of around $35 billion and the potential IPO of Saudi Aramco will add another $50 billion in foreign flows depending on valuation.
“Saudi Arabia is a reform story on many levels. Bold fiscal reforms, including steps to reduce its reliance on oil, will put Saudi’s economy on more sustainable footing over the long-term. At the same time, impressive capital-market reform is culminating in classification upgrades by key index providers. Finally, social reform continues unabated leading to new investment opportunities across the economy. As a firm, we are excited to be part of these positive developments. Franklin Templeton has a long and successful track record investing in the region, including in Saudi Arabia, and becoming Qualified Foreign Investors in the Kingdom is an important step for us,” said Bassel Khatoun, Managing Director, Frontier and MENA, Franklin Templeton Emerging Markets Equity.