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As global emerging market (EM) investors, we have keenly monitored the transition and transformation in Saudi Arabia’s economy and equity market. The Kingdom is the largest economy in the Middle East and the sixth largest equity market in the MSCI Emerging Markets Index.

Transformation is being driven by the Kingdom’s Vision 2030 framework, which provides a comprehensive economic and social blueprint for the Kingdom’s long-term goals and how it plans to realize them.

Competitive advantages include its abundant resources of oil, gas and renewable energy, investment strength, and strategic geographic location connecting three continents.

The government hopes that Vision 2030 can use these advantages to transform the Kingdom into a more diversified and modern economy and expand its global profile.

In this paper, we outline the following developments:

  • Vision 2030: Main pillars and objectives
  • Transitioning from a cyclical to structural opportunity
  • Government effectiveness: Improved budget balances
  • National investment strategy: Prospective investments and priority sectors
  • The central catalyst of the Public Investment Fund
  • An overview of the Giga-projects
  • Establishing a global tourism hub
  • Current state and goals of home ownership
  • A snapshot of demographics in the Kingdom
  • Trends and targets in employment
  • The role and growth of small and medium enterprises
  • Market development and reforms

Looking ahead, for foreign investors, the development of the Kingdom’s capital markets is of great interest. The Kingdom’s efforts to diversify away from being an oil economy are also bearing fruit, with the contribution from the non-oil sector growing gradually. We believe Saudi Arabia’s transformation could provide global investors with a unique investment opportunity.

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal.

Equity securities are subject to price fluctuation and possible loss of principal.

Fixed income securities involve interest rate, credit, inflation and reinvestment risks, and possible loss of principal. As interest rates rise, the value of fixed income securities falls. Low-rated, high-yield bonds are subject to greater price volatility, illiquidity and possibility of default.

International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. All investments involve risks, including possible loss of principal. There is no guarantee that a strategy will meet its objective. Performance may also be affected by currency fluctuations. Reduced liquidity may have a negative impact on the price of the assets. Currency fluctuations may affect the value of overseas investments. Where a strategy invests in emerging markets, the risks can be greater than in developed markets. Where a strategy invests in derivative instruments, this entails specific risks that may increase the risk profile of the strategy. Where a strategy invests in a specific sector or geographical area, the returns may be more volatile than a more diversified strategy.

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