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Video: Is Saudi inflation squeezing corporate margins and halting growth?

Renaissance Capital MENA CEO Ahmed Badr discusses the Saudi Arabian markets and economy. He speaks on “Bloomberg Markets: Middle East.”

The Saudi story is one of inflation instead of the usual deflation the country is known for, but is that something to worry about?

“It’s very natural if we are talking a reform story, with subsidy removals and the introduction of VAT,” said Badr.

“You see it happening in Egypt with up to 30% increase in inflation, so seeing a 3% or more inflation in Saudi is not surprising.”

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EFT Hermez forecasts a 30% upside in Saudi (Forecasted dollar amount or percentage increase in the price of an investment) and as such they are  going overweight on the country from an investment standpoint.

Is that a sign of momentum?

“We are already seeing momentum looking at the oil trading desk,  not to mention Saudi stocks inclusion in MSCI (The MSCI Saudi Arabia Index is designed to measure the performance of the large and mid-cap segments of the Saudi Arabia market),” added Badr.

“Al Rajihi (bank) has already attracting $500 million in inflows since January 2018 and we haven’t seen these numbers in years.”

As for corporate margins and seeing them getting squeezed by the introduction of VAT, higher labor costs, and new fees for expat dependents, “The simple answer is that the market has already factored this in and priced it for their future business dealings.”

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