Saudi to open stock market for foreigners from June 15

Dubai: Saudi Arabia will open its over $500 billion stock market for foreign institutions from June 15 this year, the regulator said in a statement on Thursday.

Saudi Arabia, which contributes to 50 per cent of the GDP (gross domestic product) of Middle East and North Africa (Mena), and 50 per cent of market capitalisation of the region, had announced in July last year of such a move saying it would help them in diversifying the economy and thereby create more jobs.

The regulator plans to approve and publish final rules on May 4. The rules will be effective from June 1, the regulator said in a statement on its website.

“The opening of Saudi markets will be considered as a milestone in the history of regional equity markets,” Sebastien Henin, head of asset management at The National Investor told Gulf News.

Foreign investors with a minimum of 18.75 billion Saudi riyals of assets under management and at least five years experience in the business will be eligible to trade Saudi stocks, according to draft regulations issued by the capital markets regulator last year.

The regulator also proposed a 10 per cent cap on foreign ownership of the market’s value. Among other draft rules, a single foreign investor could own no more than 5 per cent of any listed firm, while all foreign institutions combined could own no more than 20 per cent.

Slow start:

“We don’t expect markets to fly and foreigners to invest billions and billions of dollars soon after the start. We should expect some investors despite, it not being in the benchmark index like the MSCI, to allocate some money to start with,” Henin said.

The opening up of stock market could boost inflows of up to $40 billion, industry participants say, giving them access to companies like Saudi Basic Industries and National Commercial Bank among others.

“This would improve the visibility of the regional markets on the global scale,” Henin said.

However, any inclusion of Tadawul in the benchmark indices like MSCI, and S&P could take another 2-3 years, analysts said.

UAE and Qatar indices were upgraded to the emerging market status from frontier markets in May last year.

On Thursday, Saudi’s Tadawul All Share index (Tasi) ended 0.95 per cent at 9,251.19.