The Business Year Special Report
Waleed Fatani, Former CEO, Saudi Fransi Capital
As a result of its preparations even before the pandemic, Saudi Fransi Capital was able to come up with new concepts and processes to create an entire platform, even acquiring new customers.
How has the pandemic, together with regulatory changes, changed Saudi Fransi Capital’s deal flow and advisory work you were doing?
The Capital Market Authority (CMA) has been working on regulating the market over the past few years through a series of changes. It has changed the definition and enhanced the scope for Private Finance Initiatives (PFI) to come in, as well as changed certain regulations for Saudi Arabia in line with global markets and to allow participation of foreign entities in IPOs. It also introduced many products like securities borrowing, lending, and short selling. Aramco’s IPO brought flows from local, regional, and international players. Coupled with being included on the Emerging Market (EM) Index, many international investors are now more familiar with Saudi markets, which is creating greater liquidity. There is more retail participation in the markets today, and this is a function of the dislocation we are seeing in the real economy and markets. In terms of IPOs, the pandemic is slowing things down. We had a few deals waiting to go out, and things were put on hold; however, the market is now ripe for great demand, particularly for high-quality IPOs and in certain sectors. Certain sectors have benefited from the pandemic, case in point BinDawood coming in with a rich valuation September 2020.
How has Saudi Fransi Capital embraced digitalization to continue being productive during the lockdown?
This is part of the great thing about all the regulatory changes taking place in the background. In the past, we were heavily restricted by regulatory requirements; for example, we had to meet clients face to face and get their physical signature before we could onboard them. Bricks and mortar were, therefore, a large component of our business. The Saudi Arabian Monetary Agency (SAMA) and CMA reacted quickly in the past few years to enable the unlocking of digitalization by allowing financial institutions to onboard customers digitally. This really allowed us to start preparing for the digital transition. Fortunately, we have been working on this for the last two years to prepare our infrastructure to go entirely digital. When everything shut down, we did not face any interruptions and in fact acquired more customers. Interest in local and global equities was mounting. We have had so much business because we were ready for this, and we had a massive windfall as a result of that readiness. We have unlocked the most important pieces, which are basically customer interaction, online customer acquisition, and the maintenance of customer documentation online. When the pandemic occurred, we accelerated many of the remaining processes and came up with new concepts and processes to create an entire platform. We hope to deliver a brand-new digital space for our organization by 2021.
When do you see a return to normality for Saudi Arabia, and what are you watching in terms of important milestones for this happening?
The key milestone is when the government is able to vaccinate approximately 70% of the population, which will result in herd immunity, and allow the country to restart in-person schooling, international travel and umrah and hajj. For us specifically, key events are fiscal and monetary policies and the economy as a whole. I am watching for government spending in certain sectors to restart.
The oil market and revenues still play a significant role in balancing our budget, and that is another key indicator we are all eyeing. We are also looking to gauge the health of the private sector as well as trends in customer spending. Mainly as a result of the pandemic and the lockdown, the retail sector has been fairly robust. However, we need to see more to get a better view on the outlook. There is also great debate ongoing about whether the levy increase is a positive or a negative. It is just too soon to tell. Overall, there are sufficient amounts of liquidity in the country still, and the whole idea is to channel this liquidity internally to move the economic cycle on.