Saudi Arabia as destination and source of asset management capital
Abdullah M. Alfouzan
Chairman, The Investor for Securities Co.
Riyadh, Saudi Arabia
April 2014

•
•
Approaching $1 trillion GDP
Consistent positive GDP growth
$925
$905
$885
$865
$845
$825
GDP
• Gross national savings among highest in the world
• Highly urbanized, young population
2011 2012 2013
2011 2012 2013
• $717 billion foreign currency reserves
GDP
• > $120 billion inward Foreign Direct Investment, 2008-2011
• An ancient culture, but also thoroughly modern
8.6% 5.1% 3.6%
BASIC DATA
Population
% population 0-24 years
27 million
47%
Urbanization
GDP per capita
82%
$31,300
Daily value of crude exports > $650 million
The Investor for Securities Co.
2

• Capital Market Law, 2003
• Capital Market Authority (CMA), 2005
• CMA enforces a clear line between banking & investments
• Tadawul, national stock market,
> $510 billion total market capitalization
• More than 11 million investors, 159 traded companies, growing sukuk market
• Tadawul up:
 11% YTD,
 33% YoY
(31 March 2014)
The Investor for Securities Co.
3

• 83 active CMA-licensed investment companies
 10 linked to domestic Saudi banks
 19 to foreign banks
 13 to foreign investment companies
• > 30 Saudi investment companies are fully independent & local
• Top foreign names in Saudi Arabia: JP Morgan, Merrill Lynch, BNP Paribas, Credit
Suisse, HSBC, Deutsche Bank, KKR, Lazard
• Top domestic names: The Investor, Falcom, Jadwa, Alkhabeer
• Core businesses: Investment banking, brokerage, asset management
• 256 mutual funds, > $27 billion AUM
The Investor for Securities Co.
4

• Market preparing for King Abdullah’s signature, replace existing swap arrangement
• Draft legislation prepared, awaiting only final royal approval
• CMA chairman wants short delay, time for upgrading market systems
• At one point SAMBA’s Saif Saudi fund was largest country fund in the world
• Portfolio rebalancing, eventual inclusion in
MSCI, creates demand
• Some analysts predict up to $10 billion foreign investor demand for Tadawul listings
(up to 20% of market cap)
Key drivers: Industry & Real Estate
The Investor for Securities Co.
5

• Currently restricted, no foreign investment in
Saudi real estate sector
• Expected yields of 25% IRR or more in almost any sector, any region of Saudi real estate
• Exceptions: GCC nationals, some expatriate and international investors allowed
• Large middle class, purchasing power in SAR
500,000 to SAR 1 million range
• Perhaps one of the best potential investments in Saudi Arabia
• Housing demand today: Over 300,000 new units required
• Total Saudi construction spending 2012-2013 was > $225 billion
“With its young and expanding population, Saudi Arabia should remain the most buoyant [real estate] market, in line with its overall economic development plan….the recent approval of the mortgage law should help to drive growth in residential construction in response to the current housing shortage”
President MENA, BofA Merrill Lynch
The Investor for Securities Co.
6

• Global demand for Islamic investments, > $3 trillion
King Abdullah Financial City
• Existing $3.5 trillion AUM owned by Muslims, almost none sharia compliant
• Estimated $200 billion under management in
Switzerland owned by Saudis
• Most Muslims live a sharia life, want shariacompliant investing
The Investor for Securities Co.
7

• 230 billion Dollars worth of infrastructure projects are expected to be completed by 2014.
The Investor for Securities Co.
8

• With a total development area of 173 km².
• The total cost of the city is
86 billion Dollars.
• The city is located along the coast of the red sea, around
100 km north of Jeddah.
The Investor for Securities Co.
9

• The total cost of the expansion is 128 billion
Dollars.
• It doubles the current capacity from 48 thousand persons to reach 105 thousand persons.
The Investor for Securities Co.
10

• Aramco owns nearly 80 billion Dollards worth of projects under construction or planned in the field of oil and gas.
• in addition to infrastructure projects associated with it, such as power plants in the same oil installations.
The Investor for Securities Co.
11

• The engineering and construction cost exceeds 22 billion riyals.
• The total area estimated at 8 million square meters.
The Investor for Securities Co.
12

• This is the largest covered park in the world.
• Saudi Arabia is planning to create gardens in the city of Riyadh at a cost of more than one billion
Saudi riyals.
The Investor for Securities Co.
13

• Metro of Riyadh will create six metro lines main penetrate the
Saudi capital Riyadh from all directions.
• Includes 85 stations, at a cost of 22.5 billion dollars, is scheduled to run in 2018.
The Investor for Securities Co.
14

• The area of ​​the center
1.6 million square meters, It is located north of the city of
Riyadh.
• The project is estimated to cost 29 billion Saudi
Riyals ($7.8 billion).
The Investor for Securities Co.
15

• Ras al-Khair, also known as Mineral Industrial
City, lies 90 kilometres north of Jubail and is being developed by the
Royal Commission for
Jubail.
• The cost of Ras Al-khair projects is 4 billions dollars.
The Investor for Securities Co.
16

• The biggest chemicals complex ever to be built in a single phase.
• The $19.3bn complex will produce up to three million tonnes once it completes.
The Investor for Securities Co.
17

• Key player in Saudi capital markets
• Founded 2007, SAR 200 million paid-in capital
• Profits 2013, > SAR 82 million
• > 60 professional staff
• > SAR 11 billion AUM (CHF 2.9 billion)
• Strong presence in Saudi equity markets, private placements and real estate
The Investor for Securities Co.
18

• Capital flows from and to Saudi Arabia will continue to be important
 Increasingly sophisticated investors & businesses
• Saudi Arabia is a major destination for investors in emerging markets
 Foreign direct investment, particularly in future Saudi real estate funds
 Portfolio investment in the Saudi stock and sukuk markets, Tadawul
• Foreign bankers are welcome, but only with CMA regulatory approvals
• Our Investment Services will capture an important part of global Saudi portfolio investments
• The Investor for Securities Co. is ideally placed for both inward and outward Saudi investments
The Investor for Securities Co.
19

Abdullah M. Alfouzan
Chairman
The Investor for Securities Co.
Aljumaiah Center, King Fahd Road
P.O. Box 67838
Riyadh 11517
Saudi Arabia
Telephone: +966-11-200-7002 x 333
E-mail: a.alfouzan@theinvestor.com.sa
Website: www.theinvestor.com.sa
The Investor for Securities Co.
20