Saudi Arabia’s Tadawul stock exchange opens to foreign investors: Here are six companies you should watch
Today, Saudi Arabia's Tadawul stock exchange opens up to foreign investors for the first time. Worth more than $500bn (£323bn), it represents a huge opportunity for those with an eye for the Middle East's biggest economy.
Read more: Now is a better time than ever for women to enter Islamic banking
By opening up to foreigners, the government hopes to branch away from an oil-dependent economy. Oliver Bell of the T. Rowe Price Africa & Middle East Fund commented:
For a number of years, Saudi Arabia has embarked on an ambitious investment plan in order to diversify the economy away from oil revenues and create employment for its very young population – of which more than 50 per cent are under 20 years old.
But there's a lot to get to grips with for first-time investors in the region – there are 169 companies spanning 15 sectors, so here are six of the most promising companies to pay close attention to this year.
Saudi Basic Industries Corporation (SABIC)
In 2014, SABIC was ranked fourth in the world among chemical companies by Fortune Global 500, and the world’s 205th largest corporation.
With access to the natural gas byproduct of Saudi Arabia's vast petroleum reserves, it is one of the world's lowest-cost producers of petrochemicals.
It operates in five key business sectors: basic chemicals, intermediates, polymers, fertilisers and metals.
The government still owns 70 per cent of its shares, but has committed to reducing this to 25 per cent. It has not confirmed when this change will take place, however.
National Shipping Company of Saudi Arabia (Bahri)
This is one of the biggest shipping companies in the Middle East and the world, operating in oil and gas, dry bulk and general cargo shipping. It owns 17 crude carriers, 23 chemical carriers and four roll-on roll-off ships. In 2012 it unrelieved its new brand identity Bahri.
In the first quarter of the year, its net profit more than doubled to 399 riyals (£165m) after it increased its fleet of very large crude carriers and introduced new jobs.
Saudi Telecom Company
This is the largest mobile operator in the Gulf Cooperation Council (GCC) by market value, revenue and number of employees.
In recent years, it has expanded from domestic borders to international markets, forming a network of investments in the Middle East, Asia and Africa.
Last month, the company reported a 27 per cent increase in operating profit and an eight per cent rise in revenues for the first quarter, which it put down to improved international operations.
National Commercial Bank
This is Saudi Arabia's largest and oldest bank, and has the biggest asset value in the Arab world.
It recently issued 25 per cent of its shares to the public, which brought in $6bn for the company. This was the largest equity offering ever in Saudi Arabia and the whole of the Middle East.
It is a pioneer of Islamic banking, which involves the transaction of sukuks rather than traditional bonds, and has decided to turn itself into a fully Islamic bank within the next five years.
Riyad Bank
Another of Saudi Arabia's biggest and most influential financial institutions, it is ranked third on the Tawadul by asset value. Set up in 1957, it is also older than most.
The Saudi government currently owns 51 per cent of the shares of the firm.
Jarir
It's been a good period for retail companies listed on the Tawadul recently – in the first quarter of 2015, 14 of them posted a combined earnings increase of 11.9 per cent.
Operating profits of retail companies also grew 21.3 per cent compared to the year before, despite a decline in earnings of five major firms. Of all of the risers, bookstore Jarir came out on top, with profits up 22.7 per cent.