Strategy Note /

SAUDI ARABIA: Succession path cleared, MSCI path clearing

    Hasnain Malik
    Hasnain Malik

    Strategy & Head of Equity Research

    Tellimer Research
    21 June 2017
    Published byTellimer Research
    Succession path cleared – The replacement of the crown prince with the deputy crown prince (Mohammed bin Salman, MbS) is perhaps not surprising given the latter’s unprecedented concentration of power since Jan 2015 (he already had effective control of oil, economic and foreign policy). The 31 out of 34 vote in favour of this move in the Succession Council suggests overwhelming support for this within the Saudi royal family. But the retrospective reinstatement of civil servant and military allowances and bonuses suggests that there is a need to reaffirm the broader social contract during this process. Clearing the path for his ultimate succession addresses one risk in the Saudi investment case, but a number of other ones (all now well known) remain: (1) foreign and defence policy in an era of less predictable US policy (most recently demonstrated by seemingly contradictory messaging on the Qatar embargo from the President and the State Department), (2) domestic economic transformation and austerity amid lower oil prices and welfare dependency; and (3) social stability in an environment of online media proliferation, youthful demographic bias and unemployment).