23 July 2014
Saudi Arabia plans to open its stock market, the Arab world's biggest, to direct investment by foreign financial institutions in the first half of next year, the market regulator said.
The opening of the Saudi market, capitalised at about €394bn, is one of the most keenly awaited economic reforms in the largest oil exporting nation. Saudi authorities want to open the stock market to create jobs, diversify the economy beyond oil and expose local firms to more market discipline. But the government has delayed implementing the reform, apparently concerned about causing volatility in the market as well as the political sensitivity of allowing foreigners to build up large stakes in top Saudi companies.
Saudi Arabia’s cabinet authorised overseas financial institutions to trade equities in the Tadawul and gave the Capital Market Authority scope to determine the timing, according to state-run Saudi Press Agency. The CMA is preparing to publish rules for qualified foreign financial institutions, it said in a statement on its website.
“International investors have been eager to accumulate blue chip stocks in Saudi for the longest time,” Tariq Qaqish, head of asset management at Dubai-based Al Mal Capital PSC, said. Many have a solid track record and are “uncorrelated to a certain extent to the global financial crisis,” he said. Sabic gained the most since October to 121.75 riyals.
Etihad Etisalat advanced the most since March 2011 to 88 riyals, the highest level in six weeks, and Al Rajhi rose to 67.50 riyals. The CMA said it will seek feedback on the rules from investors and the public for 90 days and will review responses by the end of the year.
Saudi’s exchange is currently limited to investors from the six-nation Gulf Cooperation Council.