RIYADH: Saudi Arabia’s capital markets are experiencing significant growth, with issuers raising over $130 billion in the past five years as the Kingdom accelerates financing for its Vision 2030 plan.

The Capital Market Authority’s 2024-2026 strategy aims to promote investment, attract global interest, and support economic diversification, advancing the nation’s financial sector. 

According to a report from S&P Global, Saudi issuers, including the government and private sector, have raised more than $130 billion over the past five years through US dollar-denominated issuances.

“This comes on top of the $144 billion that they raised locally in Saudi riyal during the same period, with the implementation of Saudi Vision 2030 explaining part of this flurry,” the US-based credit rating agency said.

While the government makes up about 60 percent of these issuances, Vision 2030 has also opened significant opportunities in the non-oil economy and banking system.

Despite the rise in external leverage, market conditions remain favorable, with falling interest rates providing supportive dynamics, S&P said.

“We still expect leverage to remain manageable in our base-case scenario, with private-sector debt to GDP (gross domestic product) staying below the 100 percent mark in the next 12-24 months,” the agency added.

The current market environment is favorable for issuers, with declining interest rates and supportive financial conditions providing a conducive backdrop for sustained capital raising. This trend will continue as the Kingdom pushes ahead with large-scale projects and economic diversification efforts.

Residential mortgage-backed securities market on the horizon

One of the key factors to watch over the next one-to-two years is the potential establishment of a residential mortgage-backed securities market in Saudi Arabia. 

The credit rating agency said that at the end of September, “banks were sitting on more than $175 billion of mortgages that are predominantly at fixed rates and have short-term funding sources, primarily in the form of domestic deposits.”

If interest rates continue to decline, these mortgages could become more attractive for secondary market transactions. The ability to securitize and sell them would allow banks to move assets off their balance sheets, freeing up capital for further lending and investment in Vision 2030 initiatives. 

“This assumes that the legal hurdles relating to the issuance of RMBS are resolved, or at least the risks are floored at a level that would attract local and international investors’ interest,” S&P said.

The Saudi Real Estate Refinance Co., which has an A-/Positive rating, is expected to play a key role in facilitating RMBS market development. 

Direct market issuances could emerge as another avenue for mortgage-backed securities, potentially unlocking significant financial capacity for banks.

DOHA: Qatar plans to introduce three new laws as part of a sweeping review of legislation designed to make the Gulf Arab state more attractive to foreign investors, the new minister of commerce and economy told Reuters.
Sheikh Faisal bin Thani said in an interview that Qatar plans to introduce new legislation including a bankruptcy law, a public private partnership law and a new commercial registration law.
“We’re looking at 27 laws and regulations across 17 government ministries that affect 500-plus activities,” he said, describing the legislative review.
Sheikh Faisal said he expects the new bankruptcy and public private partnership laws to be drafted before the end of March.
Qatar, one of the world’s top exporters of liquefied natural gas, has set a cumulative target of attracting $100 billion in foreign direct investment (FDI) by 2030, according to the latest version of its national development strategy published last year.
But it has a long way to go to meet that target, and FDI inflows have significantly lagged behind neighboring Saudi Arabia and the U.A.E.
Saudi Arabia, which also has a target to attract $100 billion in FDI by 2030 as part of its national investment strategy, saw FDI inflows of $26 billion in 2023, after a change to how it calculates FDI, while the Emirates, the Gulf region’s commercial and tourism hub, attracted just over $30 billion according to the UN’s trade and development agency.
In contrast, Qatar’s FDI inflows in 2023 were negative $474 million, down from $76.1 million in 2022. Negative FDI inflows indicate that disinvestment was more than new investment.
While Qatar does offer similar incentives to foreign investors as its neighbors, such as a favorable tax environment, free zone facilities and some long term residency schemes, the U.A.E. and Saudi Arabia are considered far ahead in terms of regulatory reforms and business friendly laws.
Qatar’s new laws also come as part of the Gulf Arab state’s efforts to activate its private sector and transition away from government-funded growth.
Sheikh Faisal joined the government in November after serving at Qatar’s $510 billion sovereign wealth fund, the Qatar Investment Authority, most recently as chief investment officer for Asia and Africa.