While MENA markets are becoming more appealing to international investors, structural issues are causing frustration for traders, TradeTech panelists said, with fragmented, retail-oriented systems hindering engagement with the region.
According to State Street Global Advisors, the investable market capitalisation of equity and bond markets in the Middle East (free float) increased from US$552 billion to US$1.1 trillion between June 2019 and 2024. As foreign investors try to profit from this growth, idiosyncrasies in the markets are proving challenging.
“Saudi is probably the easiest market, and certainly the most liquid. However, it has mooted an omnibus approach that would allow for consolidated orders. It would be amazing if they had that,” commented Adrian Bradshaw, senior equity dealer at Invesco. He later added that Monday to Friday opening times for the Tadawul exchange would ease operational difficulties; currently, the market operates on a Sunday to Thursday basis from 10 AM to 3 PM local time.
As of this week, MSCI member stocks from the country have a market cap of US$2.3 trillion.
In the UAE (market cap of MSCI member stocks US$99.9 billion), Dubai is slightly more expensive and less liquid, while Abu Dhabi’s separation of trading and custody accounts proves challenging, Bradshaw added.
“If you place an order and when the market opens and the broker says sorry, it’s in the custody account and not the trading account, then it’s difficult to move it and by lunchtime you haven’t traded,” he explained.
“A lot of MENA structures are quite restrictive, and there are a lot of hurdles to get over,” added Julian Bruce, head of institutional equity trading at EFG Hermes.
According to the World Bank, “The MENA region is expected to grow moderately at 2.6% in 2025 — a forecast that is shrouded in uncertainty given the rapidly changing global environment as well as ongoing conflicts and extreme weather shocks. This is amidst a long history of sluggish economic growth in MENA.”
By contrast, an April report from Franklin Templeton highlighted growth in the region, noting: “of the six members of the Gulf Cooperation Council (GCC), Saudi Arabia, UAE, Qatar, Oman, Kuwait and Bahrain, four are constituents of the MSCI Emerging Market Index, with a fifth, Oman potentially joining in 2027.”
It also highlighted that the equity risk premium in the region declined from 6.6% to 2.4% between 2016 and March 2025, making markets a more appealing place for international investors to turn to.
Looking specifically at US investors’ regional allocations, Bradshaw noted that while some moved their Russian investments to the gulf region for oil exposure, others were hesitant. “A lot of our US clients have been more comfortable going back to Turkey, because they’ve been there before. That’s an established market.”
As foreign demand increases, though, MENA markets are adapting.
“We’ve seen a huge increase in US accounts setting up to trade in Saudi, and a lot of European fund managers are returning to the market” Bruce observed. “Everyone is still underweight versus the benchmark, but are gradually moving to a more neutral position.”
“Abu Dhabi has recently removed the dual account system, so you don’t need to physically check to see if shares are available prior to trading,” he noted. “However, you still need to do that in Dubai and Qatar. That involves communication with local custodians which can be free format, Swift – we’ve moved to emails in some circumstances. It’s very labour intensive, and that stems from the ID market.”
Speakers emphasised the difficulty of using algorithmic trading in these ID markets, which require foreign investors to identify themselves at each stage of a transaction and prevent consolidated orders.
“If we have multiple funds on an order, we can’t use an algorithm – you have to set up five separate orders,” Bradshaw explained. “Algos and an algo wheel we’ve developed for the region are very much future-proofing exercises. They’re not likely to be used until we can send multiple orders.”
Structural differences between countries can make it difficult to trade in the region as a whole, and make the chance for venue consolidation unlikely, panellists agreed.
“There was talk at one point about a GCC central bank, common currency and combined exchange. But I don’t think that will happen any time soon,” Bruce mused.
“Each market is quite strong when it comes to maintaining its own identity. They have different fee structures, different ways of going about most things.”
While concerns of fragmentation are equally prevalent in European markets, Bradshaw argued that the situation across the two regions is very different. “European markets are pretty homogenous in terms of costs, behaviours and trading procedures. We have a flat rate for outgoing and high-touch in Europe – it’s not like that in MENA. The UAE has different costs even within the country.”
As a historically retail-oriented region, an evolution to wholesale-friendly markets will take time, Bruce accepted. “It’s a deliberate, gradual change. We can’t dismiss everything from a generation of retail and high net worth individuals, just to cater for foreign institutions.”
He went on to recount a comment from a regional sovereign wealth fund trader: “Exchanges in the region will struggle to develop quickly if they continue to try shoehorning Western institutional business onto a retail legacy template.”
