The Strategist

Citigroup: Saudi Arabia is the most promising market now

05/30/2016 - 15:16

The large-scale privatization, planned by Saudi authorities, is already making the country the most promising direction for investment banks in the developing markets. This opinion was expressed by a Citigroup’s expert.

Head of investment banking division of Citigroup bank in the Middle East Omar Iqtidar told to Bloomberg that the transformation plan of the Saudi economy and its move away from oil dependence can bring fantastic revenues to investment banks. According to Iqtidar, the world is now witnessing skeptical investors that are beginning to believe in a successful restructuring of the Saudi economy.

As Iqtidar notes, now the market of mergers and acquisitions in the Middle East does not seem to be very active, given already announced deals, yet the potential of this market is very high. The Citigroup’s expert said that Saudi Arabia, Kuwait and Egypt represent the most promising investment opportunities. In particular, he distinguished sectors such as petroleum refining, petrochemical, health and consumer products. 

In April, son of the Saudi King Salman, Prince Mohammad bin Salman Al Saud, announced large-scale reforms, which aim to transform the country's economy and its move away from oil dependency. Bin Salman declared that the reforms will make Saudi Arabia to "be able to live without oil" by 2020. The planned measures include IPO of the world's largest state oil company, Saudi Aramco. The government plans to sell 5% of the company shares on the Saudi stock exchange Tadawul in 2017 or 2018. As reported Bloomberg agency’s informed sources in April, investment bank JPMorgan Chase & Co., and former employee of Citigroup Michael Klein will become the main consultants on Saudi Aramco’s IPO. 

Saudi Aramco’s remaining 95% will go into the disposal of a sovereign Public Investment Fund. The Saudi authorities plan to make the institution the world's largest fund, combining assets of $ 2 trillion in it.

Saudi authorities’ plan of the economy transformation is called "Vision 2030". It is aimed to abolish subsidies for the population (for example, subsidies for gasoline and electricity), as well as introduce additional taxes (VAT and ‘fat cat’ wealth tax). Within 5 years, the government is also going to introduce the Green Card system within the country. The system is supposed to allow Arabs and Muslims from other countries to live and work on Saudi territory for a long time. The size of the Saudi Stock Market Tadawul will be increased twice by simplifying access to foreign companies, and by making tens of Saudi companies public.