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Dubai Poised to Benefit From Saudi Arabia’s Market Opening

Saudi Arabia will allow international investors access to its stock market next week, but instead of the country’s capital Riyadh, it is Dubai that may initially reap some of the rewards.

Banks, law firms and fund managers are all looking to add staff in response to the opening of the country’s $580 billion stock market which is expected to further boost the Middle East’s largest economy. Hiring, however, may at first take place in neighboring Dubai.

“A critical piece of doing business in Saudi Arabia is having an office in Dubai,” said Marwan Elaraby, managing partner Middle East at U.S. law firm Shearman & Sterling. “This allows for connectivity to a key regional hub as well as simplifying logistics,” he said.

Several of the world’s largest fund managers say they will wait before establishing permanent offices with large staff on the ground in Saudi Arabia. They argue they already have limited access to Saudi stocks through the existing system of swap agreements. Teams in Dubai that have been in place for years already cover the kingdom and the rest of the Gulf region.

One international fund manager said his firm will assess how the first months and even years of the market opening pan out before setting up a large office in the kingdom.

“You need to do the due diligence before committing substantial capital. The bottom line is that we already have access,” the fund manager noted. He added that if Saudi Arabia were to be classified as an emerging market by MSCI—a move that could take another two years—fund managers would be much more likely to build a large presence in Riyadh.

The major international investment banks that are already in Saudi Arabia have signaled they’re recruiting for a small number of roles to prepare for an increase in business volumes but those are more incremental in nature.

Aside from a well–functioning financial center, Dubai, or even neighbouring Abu Dhabi or Doha, certainly looks the more attractive option to live in compared to Riyadh where austere religious rules dominate daily life, meaning women are not allowed to drive and most forms of entertainment such as movies and concerts are banned. The country does have a sizable foreign population working across sectors, especially in the oil & gas industry.

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