Political instability causing assets in Saudi Arabia to be increasingly offshored, says GlobalData
December 12, 2017 (Investorideas.com Newswire) Recent political turmoil will leave Saudi Arabia at risk of a considerable wealth outflow, according to GlobalData, a leading data and analytics company.
Saudi Arabia is one of the nations that is most heavily invested in within global stock markets. However, wealthy individuals will be more reluctant to invest or keep their assets in the country in future due to the current political situation.
GlobalData's 2017 Global Wealth Managers Survey confirmed that over 60% of wealth managers globally feel that political instability has a higher weight than macroeconomic conditions when it comes to asset allocation strategies.
Silvana Amparbeng, Financial Analyst at GlobalData commented: "Saudi Arabia is facing challenging times, between leading an embargo against neighbouring Qatar, coming to terms with its conservatism, and a corruption war against its own princes.
"Furthermore, the crown prince's reforms to develop the country have triggered a wealth flight, which will undermine investments, making it even more difficult for the kingdom to develop and reach the ranks of the more developed markets."
Behind Israel, Saudi Arabia is the second-largest Middle Eastern market in terms of retail liquid assets, as well as the proportion of savings allocated to equities. It is forecast to maintain this position up to 2021.
Amparbeng continues: "The country has traditionally represented a lucrative market for wealth managers and wealthy individuals, including the royal family, needing professional advice to invest their sizable wealth."
However, since November 2017 the financial and political landscape has shifted dramatically. The crown prince has jailed over 200 fellow princes and frozen their assets in a campaign against corruption. This represents around $800 billion of assets which, in the event that these individuals are released and their assets freed, is likely to be offshored to avoid the fallout of political instability and the growing power of the crown prince.
Amperbeg concludes: "Wealth managers serving Saudi Arabia's affluent individuals will see growth in demand for offshore investments. Private banks must be ready to accommodate these needs and build compliant offshore solutions for their clients. As an emerging economy, high-net-worth assets would be useful in an effort to modernize the country's economy."
For more information
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