Saudi Arabia has been largely ignored in the debate over the index compiler MSCI's discussions on whether to upgrade the UAE and Qatar to emerging market status.
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But it appears the country's Tadawul stock market wants to be part of the conversation as it has emerged it is in talks with several index providers, including MSCI, to become one of their components.
"The kingdom is eligible to join emerging markets' indicators like some of other markets in the region," Abdul Rahman al Tuwaijri, the president of the Saudi Capital Market Authority (CMA), was quoted as saying by the state news agency SPA.
No specific time or details on the talks were given but news of the talks is an indicator that Saudi officials recognise the significance of being included, and are increasingly willing to make the necessary changes.
The kingdom's stock exchange appears an obvious choice. It is the Arab world's largest and most liquid bourse. Its importance was highlighted at the height of the Arab uprisings, when many were eyeing the movement of capital in and out of the kingdom.
But for all of its size, the market was until recently almost impossible for international investors to access.
In 2008, CMA allowed foreign investors to buy Saudi shares indirectly by means of "total return swaps" through licensed brokers in the country. The swaps do not give voting rights but allow access the market.
But analysts say it is not enough to warrant an immediate upgrade.
"The market is closed and there are many rules and regulations which limit people's exposure to the market," said Asma Dakkak, an NCB Capital analyst in Riyadh.
An upgrade "would obviously be a good boost to the Tadawul but how soon and when it will happen is in question," she said.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”