Vision 2030 investments driving Saudi equity markets growth: S&P
In this report, the ratings agency also examines the development of sukuk markets in Latin America, Europe, the Middle East, and Asia.
In emerging Asia, the development of deeper domestic capital markets has been a consistent economic policy, even though the depth and composition of domestic bond markets vary widely.
"The development of Saudi Arabia's overall financial markets continues to accelerate due to large-scale Vision 2030 investments, regulatory reforms, initiatives to attract overseas funding, and investments in capital markets infrastructure over the past decade," said S&P Global Ratings credit analyst Timucin Engin.
"The markets' growth will help companies to diversify their funding bases and secure long-term capital," he noted.
The kingdom's Vision 2030 projects are aimed at developing a liquid local-currency debt capital market with diverse issuers and investors. Significant hard currency issuance by nonfinancial corporates began only a few years ago, but it's starting to speed up.
"Deeper domestic capital markets all share the same characteristics of high issuer and investor diversity, stringent and timely disclosure requirements, good liquidity, and high-quality market infrastructure," said S&P Global Ratings credit analyst Xavier Jean.
"Malaysia's and Thailand's in particular have been well developed for decades. Malaysia hosts the most developed Sukuk market globally, now accounting for over 60% of global issuance," he added.
"The 1981 privatization of the pension system enhanced the demand for domestic fixed income products in Chile," said S&P Global Ratings credit analyst Luca Rossi.
"The development of a solid local bond market was facilitated by a favorable legislative framework, promoting transparency and investor protection," he added.
Similarly, the role of the central government was crucial in Brazil in supporting the ascent of local institutional investors and promoting the diversification of the corporate bond market, even through tax incentives (infrastructure debentures).
KEY TAKEAWAYS
*The Saudi domestic corporate bond and sukuk markets expanded at a steady pace over the past five years, while a limited number of issuers currently dominate the markets. Foreign participation and secondary trading are limited.
S&P Global Ratings believes strategic investments in market infrastructure, policy support, and regulatory developments should support the markets' long-term growth.
"We view the development of domestic bond and sukuk markets as supporting credit conditions in the country because companies can diversify their funding bases and access long-term capital, it added.
Copyright 2024 Al Hilal Publishing and Marketing Group Provided by SyndiGate Media Inc. (Syndigate.info).
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