Vision 2030 and the opportunities for Saudi Arabian capital markets
In this exclusive interview with Samir Assaf, CEO of HSBC Global Banking and Markets, he explains why Vision 2030 is such an important opportunity, both for Saudi Arabia and the international financial community.
"Vision 2030 is about creating the right economic environment for sustainable economic growth in Saudi Arabia, which will fulfil the population's aspirations," says Assaf.
He notes that the international investment community has a key role to play in helping the country meet its ambitious goals. "It is our job as an international bank to continue developing the story and supporting the Saudi government, while explaining to the investment community that it is happening, and that it is sustainable."
One of the key pillars of the reform process is to develop the Saudi Arabian capital markets to enable the economy to develop and diversify. Today, most of the economy is financed by banks and entrepreneurs. Assaf notes that the establishment of the Debt Management Office has driven transactions totalling approximately US$50bn in international markets. There will also be much more scope for domestic debt to play a bigger role and align to similar practices of developed markets.
The equity markets in Saudi Arabia are already valued at US$500 billion and are the biggest in the region. When the country achieves inclusion in the MSCI indices, as is expected to happen in June, this will automatically attract a further US$35 billion of international capital to the market. "HSBC is well presented in the [Saudi] market to support its opening, to bring in international investors and tell the story as it is," he says.
Much has been made about the need to diverse the country's trade. At present, 50% of its exports and 33% of its imports are with Asia, with oil and chemicals being the main exports and electronics and automobiles being the main imported goods. A further 12% of exports go to both Europe and North America, while 25% of imports come from Europe and 16% of imports come from North America. This is likely to change significantly over the next 12 years. "Vision 2030 is all about diversifying," says Assaf. "It is an excellent opportunity for the country to position itself as the carrefour for global trade routes. The geographic situation is perfect and the rebalancing is happening." The diversification of trade will be matched by the diversification of capital. Saudi Arabia is already and will continue to be a major exporter of capital, as demonstrated by large GRE national champions and strategies outlined by the Public Investment Fund, but Vision 2030 will also allow it to become a major importer of capital.
There are challenges ahead in the process, which Assaf notes as being the pace of change, the confidence of implementation and the social impact of the changes. But the opportunities, especially for the capital markets, are compelling. "The Saudi Arabian capital markets do have a long way to go," says Assaf, "but they have an excellent starting position."
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