As the Gulf Cooperation Council (GCC) economies strengthen links with the global economy, their stock markets also need to be opened to foreign investors to help them benefit from an inflight of capital. The call for stock market liberalisation is gaining momentum in recent months as the region creates a common market within the GCC, which requires all member countries to adopt similar policies for investment and cross-border fund flows.
Although some of the GCC stock markets, such as the UAE, are open to foreign investors — barring certain companies’ stocks that are restricted to the GCC nationals — Saudi Arabia, the largest Arab economy, is yet to open its bourse to foreigners despite calls from the country’s private sector entities to do so.
As it is, Gulf nationals and the financial institutions controlled by them are some of the biggest investors in western bourses — a fact that strengthens the logic of reciprocity. Besides, due to the financial crisis in Europe, stock markets in the emerging markets, including those in the GCC are becoming more lucrative for international investors.
Initial public offerings in the GCC almost stopped since more than four years.
Opening up the rest of the GCC bourses to foreign investors will also help boost the indices of these markets and will encourage more companies to go public and bring back investor confidence. However, the countries should also strengthen market regulations to help reduce risk, tackle insider trading, transparency in investment rules and rules guiding withdrawal from the market.
