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Middle East to see biggest ever
liquidity event through Saudi Arabia
developments
The rapid development of the Middle East’s capital
markets is reflected through wider participation of global
investors and accelerated by inclusion in key Emerging
Market indices. In 2018, Kuwait joined the FTSE Russell
Emerging Market index while 2019 will see Saudi Arabia,
the region’s largest and most liquid equity market, includ-
ed in the Emerging Market indices of both MSCI and FTSE
Russell. Our expectation is that this will trigger approxi-
mately $14 billion in passive inflows into the Saudi Stock
Market. When you combine the passive flows with the
broader capital market reforms, I expect we will see billions
Kapil Seth, head of HSBC Securities
Services, Middle East and North Africa
more of actively managed capital flow into Saudi Arabia,
creating the region’s biggest ever liquidity event. Greater
international capital flows will lay the groundwork for Sau-
di Arabia to establish itself as a truly global capital market,
capable of hosting the world’s
largest companies and
accommodating
the needs of
the world’s
largest
Expect a number of emerging
investors.
markets to be put up for review
in the second half of 2019.
Stewart Gladstone, director, sales and relationship
management for emerging markets, Societe Generale
Emerging markets will be up for
review in 2019
As we approach the end of 2018, engagement with partners
and clients indicates that Brexit continues to draw atten-
tion away from strategic initiatives and anything other
than mandatory changes within agent bank networks.
Movement between providers in frontier markets and
smaller emerging markets has been limited and this looks
unlikely to change in the near term. This is largely due
London can take the lead on tapping
China’s institutional investor base
We have high hopes for this scheme, which will open
up China’s locally listed companies, to a broader pool of
international investors. We expect significant interest from
mid-tier foreign investors in particular, who haven’t had
access to A shares before. The scheme could give London a
head and shoulders lead in the competition to tap China’s
institutional investor base and vast equity market. And with
Brexit around the corner, it could reinforce London’s status
44
Global Custodian
Winter 2018
to the absence of a justifiable cost reduction versus the
heightened cost to run an RFP and ultimately transition
business. Exceptions have generally only been seen when
a requirement to review an incumbent custodian is driven
by risk, regulation or changes in ownership of providers, as
has been seen recently in the Polish, Romanian and Russian
markets. However, discussions in several meetings during
SIBOS this year indicated that we should expect a number
of emerging markets to be put up for review in the second
half of 2019.
Stanislas Beneteau, UK head of
financial intermediaries & corporates,
BNP Paribas Securities Services
as a global financial centre. The scheme could also have
“collateral benefits” for the securities lending and borrowing
activity. The mismatch in settlement cycles and different
time zones between London and China for example could
leave brokers with a funding gap, opening up opportunities for
liquidity providers. We expect to see a number of well-known
companies listing GDRs in 2019 to gain access to the Chinese
investor base.