Saudi Arabia will open its stock market to direct foreign investment on June 15, allowing approved foreign investors to invest in the kingdom, the capital market authority announced on Thursday, in a move which analysts expect will bring large volumes of capital into the country.

With a value of around $532 billion - the bourse is the Arab world's biggest stock market and one of its most diverse.

Previously, foreign investors outside of the six-member Gulf Cooperation Council (GCC) have been limited to buying Saudi shares indirectly through swaps or exchange-traded funds.

The kingdom announced last July that it would permit direct foreign purchases of shares in the first half of 2015, as a way to expose companies to the market, and diversify the economy beyond oil and boost employment.

The news comes soon after the stock market - known as Tadawul - reported a 74 percent jump in net profit last year, aided by a higher trading income.

Liquid market

Nahed Taher, CEO of Bahrain-based Gulf One Investment Bank, told Al Arabiya News that with the predicted new wave of foreign investment would advance the market beyond short-term trades - and further stability.

“The international long term investment mentality I believe will reflect on the market and they [foreign investors] will not come just for quick trades, which is happening now,” said Taher, who is known as the first Saudi woman to head up a regional financial services firm.

“Also, having international money will mean a lot of diversity with the stock market and give it more depth, and maybe bring more good regulations and better financial indicators,” she added.

Interest in Saudi's bourse stretches far overseas.

Australian trade minister Andrew Robb told Al Arabiya News in an interview last week there has been “lots of interest” from Australia regarding the opening up of the Saudi stock market for foreign investment and that such interest would be “turbo-charged” if Australia and the GCC signed a free trade deal.

Expected outcome

Mutlaq al-Baqmi, editor in chief of the Saudi-based Maaal electronic business publication told Al Arabiya News that “the decision was expected since last July, that before the end of the first half of 2015, the Saudi stock market will open to direct foreign investment.”

The Capital Market Authority announced back then they had discussed the conditions with investors and stock market officials.

“The opening-up of the Saudi market to foreign institutional investors is meant to benefit from the experiences of global companies,” he said.

Buqmi said Saudi Arabia is known for its highly liquid market and this step aims to expand the market from individual-based investments to institutional ones.



(With Reuters)

Last Update: Wednesday, 20 May 2020 KSA 09:44 - GMT 06:44