Riyadh - Mubasher: Al-Rajhi Capital expects 2017 to be a key year of implementation, as Saudi Arabia pursues its transformative Vision 2030 plans and NTP 2020 objectives, with various initiatives gathering momentum, according to a recent report.
The government’s key role is likely to move from that of a key capital contributor in the past to that of a regulator, facilitator and a partner, opening up abundant opportunities for the private sector, the report added.
“The planned capital market reforms in 2017 are also likely to improve the Kingdom’s chances of an early inclusion in the MSCI EM Index. After two years of price volatility and negotiations, we expect 2017 to be a crucial year for the oil market with investors closely evaluating the effectiveness of the production cut given the upward shift in the oil price post the OPEC agreement.”
While private sector investments are likely to see a gradual pick up and consumer spending concerns remain, the Saudi Stock Exchange (Tadawul) is better positioned due to the concentration of more stable sectors than the local economy, the report indicated.
Though the recent rally leaves limited scope for a sharp upside in the short-term, we believe our set of preferred picks, Maaden, Yansab, SABIC, Almarai, and Hammadi, are best positioned for long-term outperformance, while we are likely to see better entry points later with better visibility, the report highlighted.
“The key macro upside triggers in 2017 are likely to be from further easing of liquidity, inflow of foreign capital helping build up foreign exchange reserves, rising local employment levels driving consumption, and elevated level of oil prices.”
“The downside risks for the market are a substantial fall in oil prices, lack of sufficient private participation, faster than expected decline in Central Bank’s foreign exchange reserves, liquidity concerns and major global economic downturn or geopolitical events.”
