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Association seeks to build bond market in Saudi Arabia

Saudi arabiaA trade association that aims to develop the market for conventional and Islamic bonds in the Gulf countries has established a group in Saudi Arabia, the region's largest economy.

Mohammed Albensaleh, associate director, debt capital markets at HSBC, will lead the new Saudi Arabia chapter of the Gulf Bond and Sukuk Association (GBSA). He will aim to bring market practitioners together to improve practices and support the authorities' efforts to build the market.

“The Saudi market has the potential to be a real powerhouse for the entire region’s sukuk markets. What happens there will undoubtedly be watched carefully or even emulated,” says Stuart Anderson, regional head, Standard & Poor’s Middle East, who is chair of the GBSA regional steering committee.

Saudi Arabia is significant because it is the largest economy in the Gulf region and its stock exchange, the Tadawul, has the highest market capitalisation in the whole of the Middle East and North Africa.

Demand for sharia-compliant investment instruments is high in Saudi Arabia, and there have been numerous large issues of sukuk, or Islamic bonds. However, fixed income investment is relatively low in the country, where investors generally prefer to invest in equities, real estate or money market funds.

Saudi Arabia's capital markets are currently closed to direct investment from outside the Gulf Cooperation Council countries, which limits foreign participation in the markets. However, there are plans to open up the market, perhaps following the example of the Chinese qualified foreign institutional investor programme.

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