Fund managers withdraw from Saudi equities

Global fund managers have withdrawn $650 million from Saudi Arabia’s equity markets in the last week in reaction to the murder of Saudi journalist Jamal Khashoggi, a critic of the country’s rulers who was last seen entering the Saudi consulate in Turkey.

Although the Saudi stock exchange, or Tadawul, is dominated by domestic investors, with only 5% of stocks owned by international investors, de facto leader Crown Prince Mohamed Bin Salman has actively courted global fund managers as part of his strategy to lessen the economic dependence on oil revenues.

And while these ambitions were boosted by the kingdom’s upcoming inclusion on the popular MSCI emerging market index, which is set for June 2019, the worldwide fallout from the Khashoggi killing has been widespread.

Firstly Bin Salman’s flagship investment conference, dubbed the Davos in the Desert, was hit by a string of withdrawals from high-profile speakers and attendees, including the respective heads of Blackstone and BlackRock. Now it is facing significant outflows from international investors. However, it remains to be seen whether the outrage over the Khashoggi scandal will have a serious economic impact.

The sentiment among these investors was encapsulated by Daniel Vaughan, an investment consultant and fund selector at data selector Morningstar, who was speaking to the Financial Times. “It’s a market I would rather not invest in unless I have to but it’s such a big economy in the region we have to have some investment in Saudi.”

©2018 funds global mena

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