Mutual funds increased institutional ownership in Q4: Al Rajhi Capital

Saudi mutual funds, led by private funds, boosted their institutional ownership in the Saudi Stock Exchange (Tadawul) during Q4 2016, Al Rajhi Capital said in a report on Monday.

“While GREs (government related entities) were the major driver for this trend until Q3 2016, it was Saudi mutual funds, led by private funds that drove the surge in institutional ownership in Q4 2016,” the brokerage said.

According to the report, Saudi institutions’ ownership increased 540 basis points (bps) to 65.2 percent, while individuals’ ownership dropped 420 bps to 28.4 percent.

The mutual funds’ aggressive net buying was one of the key factors driving activity on Tadawul in Q4, the report said, adding that improved sentiment following Saudi Arabia’s international sovereign bond issuance and budget announcements also played a role.

Tadawul’s traded value rose to an eight-month high in December 2016, with the market gaining 28 percent during the period, after recording multi-year lows in August-September 2016.

The report also noted that qualified foreign institutional investors (QFI) ownership remains low, but has started to edge higher.

QFI ownership may rise over the medium-term, driven by less stringent requirements and changes to the settlement cycle effective from mid-2017, expected reviews by major index providers, and the upcoming initial public offering (IPO) of Saudi Aramco.