BlackRock monitors Saudi market, sees rising foreign inflows into stock, bonds

28/11/2025 03:17 AST

BlackRock, the world's largest asset management firm, is closely monitoring developments in the Saudi market, particularly amid efforts to ease foreign investment access and enhance the market's attractiveness to global investors, said Ben Powell, chief investment strategist for Asia-Pacific and the Middle East.

In an interview with Argaam during his visit to Riyadh, Powell said the coming period may see greater foreign inflows into both the bond and equity markets, supported by the stability of the riyal's peg to the US dollar, which reduces currency-volatility risk for global investors.

Rising market appeal, cautious enthusiasm
Powell noted that one of the most significant developments in the Saudi market is the structured move to increase the foreign ownership limit in the financial market, describing these steps as a "structural transformation" that is shifting the market from a purely local platform to a global investment destination.

BlackRock is monitoring these developments with cautious enthusiasm. Raising the foreign ownership ceiling paves the way for two-way capital flows, instead of the region being merely an exporter of capital, said the official. He expects this direction to expand the base of international investors in Saudi equities and bonds, particularly with a supportive regulatory environment and a stable dollar peg.

Powell also indicated that recent years have seen a gradual shift in Saudi Arabia's financing structure, with instruments such as government debt and bank lending becoming major funding channels. He stressed that lower oil prices add further momentum to this trend, accelerating the diversification of funding sources and expanding the role of capital markets.

He pointed out that oil prices are likely to remain under pressure in the short term amid abundant global supply and fading geopolitical risks, which reduce the risk premium and lead to trading driven more by fundamentals.

While this decline represents a "contained challenge" to government revenues across the region, it also presents an opportunity to strengthen the shift toward a more diversified financial economy - an effort led by Saudi Arabia through the development of its capital markets, he added.

Saudi mortgages shift to securitization
Saudi Arabia is poised to see growth in securitized financial instruments, particularly in the mortgage sector. This model has been highly successful globally, especially in the US, by relieving pressure on bank balance sheets through transferring part of the loan portfolio to the market via asset-backed securities, Powell stated.

He added that BlackRock has deep-rooted expertise in this field, stemming from its founding by Larry Fink, one of the early pioneers of mortgage securitization. Powell also affirmed that the company is prepared to support the development of this market in the Kingdom in line with Vision 2030 goals.

Limited Fed cuts, little Gulf effect
Regarding interest rates, Powell highlighted that inflation in the US remains above the Federal Reserve's target, limiting its ability to make substantial rate cuts.

He added that some risks may emerge in the coming months, as inflation could edge slightly higher when the effects of tariffs become more evident across sectors.

Powell also expects one rate cut in late 2025 and another in 2026, meaning that the monetary easing cycle in Gulf states will be limited due to the region's monetary policies being tied to the Federal Reserve.

He emphasized that the GCC currencies' peg to the dollar is a major attraction for global investors as it reduces currency risk - though it also limits monetary policy independence in the region.

AI reshapes flows; Gulf emerges
Powell also stated that the world is undergoing major shifts in investment geography, driven by the rise of artificial intelligence and the restructuring of global supply chains, noting that investments are becoming more selective and more complex.

The GCC region, particularly Saudi Arabia and the UAE, enjoys competitive advantages in energy, infrastructure, and advanced technologies. The recent partnerships with the US, including the approval of supplying advanced semiconductor chips, strengthen the region's position as a vital hub for global AI infrastructure, according to the official.

Active, diversified strategy ahead
Powell said international investors should focus on active investing rather than risk-on strategies, stressing the importance of diversifying portfolios across assets, sectors, and geographies amid a more complex economic landscape with widening performance disparities across industries.

The region is likely to benefit from several "major growth drivers," including energy, artificial intelligence, and regulatory openness, which enhances the attractiveness of Gulf markets as a long-term investment destination, he added.

Arab News