Notes the Tadawul index peaked in 2006 and has been in a secular bear market for two decades. Asks why.
Joumanna Bercetche
Tad-Fad-La
The 2005-06 market reflected a 20th-century economy with few, speculative, subsidized monopoly stocks. Over 20 years, the market has deepened to reflect a 21st-century diversified economy. This period was a 'gestation period'.
Asks if the economy and stock market will now converge, given strong GDP growth that didn't translate before.
Joumanna Bercetche
Tad-Fad-La
Yes, the market is now starting to reflect the economy more closely. If the economy continues its growth, the stock market should do very well.
Asks about the index composition moving beyond just oil/Aramco.
Joumanna Bercetche
Tad-Fad-La
Oil is vital for the economy, but the index has evolved dramatically from 78 to 266 companies, reflecting diversification.
Asks how recent reforms will support future performance and liquidity.
Joumanna Bercetche
Tad-Fad-La
Vision 2030 reforms have accelerated. The increasing weight of reforms is reaching a tipping point for positive market reaction. The financial ecosystem has developed with more institutional and foreign investors, aiding liquidity and stability.
Asks about the role of FDI in the outlook.
Joumanna Bercetche
Tad-Fad-La
FDI targets are very ambitious ($100bn by 2030). Recent leadership changes may signal a new approach. Current levels are around $30bn, requiring a tripling.
Asks for a price target and timeframe.
Joumanna Bercetche
Tad-Fad-La
Base case is for the Tadawul to essentially double over the next 10 years, implying ~10% annualized return including dividends.