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Middle East Securities Forum 2016

15 - 16 March 2020

NeMa Blog

What happened at the Middle East Securities Forum (MESF) 2016?

Written on 17 March 2020 by Lucy Eldred

#MESF16

By Charles Gubert

The Macroeconomics:

 

Liberalisation:

Saudi Arabia is home to a number of untapped treasures. Its stock market capitalisation is bigger than Russia’s yet it has been a notoriously tough market to access for foreign investors. This is changing following reforms by the Capital Market Authority (CMA), Saudi Arabia’s financial services regulator. New rules introduced in 2015 permit large foreign investors to gain limited exposure to securities listed on the Tadawul. This liberalisation is a first step, and it is likely future reforms will be forthcoming. The rules only apply to large institutions with assets in excess of $5 billion and five years track record. It is hoped this will be eased to permit nimbler market participants to invest. Trading volumes since the rules’ inception have increased although there has not been a flood of net new capital. Most MESF delegates are confident trading volumes will only go north, particularly if the country is upgraded by MSCI to its Emerging Market Index from Frontier Market Index.

 

The Infrastructure:

GCC economies including Saudi Arabia, Oman, Kuwait and Bahrain are building market infrastructures such as central securities depositories (CSDs) as a means to attract foreign investors. Issues do, however, remain around highly manual corporate actions processes, pre-funding of trades and dual account structures in certain markets which is a continual headache for global custodians. The creation of an independent custody model in some markets negating the requirement for investors to use local brokers (whose balance sheet and risk management controls may be spurious) is a welcome boost, particularly for 40’ Act mutual funds in the United States and UCITS. There is a dilemma about building central counterparty clearing houses (CCPs) in GCC markets as there is minimal OTC derivatives trading activity. Proponents of building CCPs are adopting “The Field of Dreams” approach in that if you build it, they will come. As such, an OTC market will not be created in GCC markets without a CCP propping it up.

 

Fund Managers:

Domestic fund managers in the GCC have struggled to grow assets despite the sheer wealth in the region. Investors – such as high net worth individuals, sovereign wealth funds and family offices – are in abundance in the GCC. The lack of harmonised regulation in GCC markets makes distribution a challenging proposition for all fund managers. Different markets have wildly conflicting or confusing rules making pan-GCC distribution difficult. Some have called for more uniformity or even a fund passport similar to UCITS or the Alternative Investment Fund Managers Directive (AIFMD). The creation of a passport is, however, a long-distant prospect.  

'This is possibly the single largest development in the Middle East Capital Markets Landscape in the past decade'  - Arindam Das, HSBC 

Saudi Arabia is the single largest market in the Middle East; it accounts for approximately 45% of the region's market capitalisation, and about 67% of the region's trading turn-over. Impressive figures, but now that the Saudi government has opened up their trade borders, what does this actually mean for the global financial landscape?

A Postcard from Athens - what took place at NeMa 2015?

Written on 14 June 2020 by Lucy Eldred

Hello from sunny Athens. Well, hello from 20 miles south of Athens actually, the small town of Vouligameni on the coast and the location for the Network Management (Europe) Conference – NeMa. NeMa comes in four flavours – Americas, Africa, Europe and Asia. The European conference is the largest and most well established and this year it welcomed over 460 delegates. The biggest ever. The timing and location couldn’t have been more interesting. A series of cliff-hanger episodes between Greece’s creditors and the home or democracy itself kept us all on our toes and any small period between the major issues of network management debate could easily be filled with speculation on who would do what to whom next.

Saudi Arabia's equity market access, which was earlier restricted to foreigners only through mutual funds, has been open to citizens of the Gulf Cooperation Council (GCC) since 2007 and indirectly to non-GCC foreign investors since 2008 via swaps and participating-notes. The announcements made in August 2014 allowing non-GCC foreign institutional investors access to Saudi equities directly is an important landmark in the evolution of the Saudi capital markets.

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