Manama: Bahrain has seen a notable turnaround in capital flow sentiment, moving from a 73 per cent net negative view score last year to a positive score of 27pc this year.

This is according to Invesco’s sixth annual Middle East Asset Management Study.

The findings released yesterday also show that the opening of the Saudi Stock Exchange to foreign institutional investors in June has contributed significantly to the direction of private capital flows in the GCC region.

Invesco said its in-depth market study was based on 167 interviews with sovereign wealth funds, state pension funds, local insurance companies, family offices, banks and independent financial advisers across the region.

Last year’s study found the UAE, with its “safe haven” status and strategic position as a hub between Asia and Africa, to be the main beneficiary of inflows of private capital into the GCC region.

However, while the UAE remains popular, with 73pc of respondents saying investable assets and people are in net inflow into the UAE (compared to 89pc last year), this year’s study reveals a remarkable turnaround in the net respondent view scores on the direction of capital flow to Saudi Arabia, from -17pc last year to +61pc this year.

The primary driver of inflows in Saudi Arabia was positive perceptions of the economy and the opening of Saudi capital markets.

The opening of the Tadawul, Saudi Arabia’s stock market, to international investors in June this year, was eagerly anticipated by participants and seen by many as a first step towards market liberalisation and future reforms.

Many expect this change to be a key driver of medium-term capital inflows, even if it would only have a relatively small impact on capital flow in the short term, the study said.

Bahrain’s sentiment improvement has a causal link to Saudi Arabia as a key regional partner.

“Our conversations in the region show that whilst there has been optimism surrounding the regional economy and capital markets, concerns such as the oil price and government finances persist,” Invesco Middle East head Nick Tolchard said.

“Whilst things can change quickly in the Middle East, it will be interesting to see if positive sentiment amongst local, especially Saudi investors translates into reality over the next 12 months and whether the anticipated effects of the opening of capital markets take hold.”

avinash@gdn.com.bh