Aathira Prasad is an economist with a deep understanding of the Middle East. She is director at Nasser Saidi & Associates, a specialized advisory firm based in the United Arab Emirates that focuses on providing consulting services to a diverse range of clients.
Prior to that, she spent nearly five years at the Dubai International Finance Centre (DIFC), most recently as director of macroeconomics and statistics—a position where she provided economic analysis and forecasts of the MENA region and contributed to the DIFC’s strategic plans. She has also co-authored a number of research papers focusing on economics of the MENA region.
Earlier this year she shared her expertise with Global Executive MBA students from Duke University’s Fuqua School of Business who were studying in Dubai. More recently she provided insights into the region’s current economic climate in a Fuqua Q&A.
Q) The large Saudi Arabia stock market that had previously been off limits for direct foreign investment recently opened up. How do you think this will affect the Gulf economy as a whole?
The opening up of the Saudi market is an important milestone: simply because Tadawul alone accounts for more than 50 percent of the market cap of the Gulf Cooperation Council (GCC) countries and is the most liquid. The country is also the largest economy in the Middle East, with a nominal GDP of USD 752 billion in 2014. Tadawul has over 160 stocks, a market capitalization of approximately USD 530 billion and is relatively more diversified compared to other exchanges in the region, with sector representation from petrochemicals, banking, telecom companies, retail and real estate.
However, simply opening the market to qualified foreign institutions is not sufficient to make the market an attractive one. Much reform is needed: efficient financial markets require breadth (a wide variety of financial securities and instruments), depth (sufficient size to enable transactions without leading to large bid-ask spreads) and liquidity (ability to enter and exit markets without affecting price). Saudi needs active money markets, bond and Sukuk markets, and could even use the opening up of its capital markets to encourage more listings of both Saudi and GCC companies (dual listings). All this would contribute towards Saudi’s long-term goal of economic diversification and reduce over-dependence on oil revenues.