Riyadh: Saudi Arabia's Capital Market Authority is in discussions with international banks to open the country's stock exchange to foreign investors early next year, three bankers familiar with the matter said.
The market regulator is working with the banks to prepare for the introduction of foreign investors to the region's largest stock market as early as the first quarter of 2012, said the bankers, who declined to be identified because the discussions are private.
Foreign, non-Arab Gulf investors currently can't directly invest in Saudi shares. The kingdom allowed citizens of neighbouring Gulf countries to buy and sell shares freely in 2007.
Non-resident foreigners are permitted to trade through share-swap transactions and exchange-traded funds. The market regulator approved the first ETF in March 2010.
"It would be a positive and interesting development if it does happen," said Mohammad Ali Yasin, chief investment officer at Abu Dhabi-based financial services company CAPM Investments.
"It may help with Saudi inclusion in the MSCI indexes and could then provide it with more liquidity."
Status reclassification
A spokesman for the Capital Market Authority wasn't immediately able to comment and the media relations officer at the stock exchange declined to comment when contacted by Bloomberg News.
The benchmark Tadawul All Share Index gained 0.1 per cent at 1:19pm in Riyadh yesterday. The measure has dropped 7.2 per cent this year.
MSCI Inc, whose stock indexes are tracked by investors with about $3 trillion in assets, classifies all seven Arabian Gulf bourses except Saudi Arabia's as frontier markets.
The Saudi stock exchange, which isn't classified, is in talks with MSCI on a possible inclusion in its indexes, Chief Executive Officer Abdullah Al Suweilmy said on October 18.
The region's exchanges are taking steps to improve their chances of being reclassified to emerging-market status.
