Dubai
The decision by Saudi’s market regulator to allow overseas investors to participate in the primary market help the Tadawul get off to a fast start on Sunday, but it wasn’t enough to spark a rally.
Saudi’s Tadawul index rose as much as 0.44 per cent to an intra-day high of 6,254.63, but the index later closed 0.23 per cent lower at 6,212.47. The index has shed 12 per cent so far in the year, lagging in terms of performance compared to a more than 12 per cent gains on Dubai index.
“Saudi stocks are not expected to play a catch-up with its peers in the short term as oil environment is still not favourable for the economy,” said Sebastien Henin, head of asset management at The National Investor. The break even for Saudi Arabia on oil is more than $70 (Dh256.9) per barrel, about 40 per cent lower than the current price of $50.
In the local market, Dubai Financial Market General Index closed 0.36 per cent lower at 3,559.70, while Abu Dhabi Securities Exchange General Index 0.02 per cent higher at 4,519.29.
Positive sign
“The decision to allow foreign investors is a positive sign. This decision can be seen as prelude to Aramco’s IPO. They want to make markets attractive for overseas investors,” said Henin, adding “the good question would what would be the quota for foreigners in the primary market.”
The capital markets regulator has not decided the allocation for overseas investors in the primary market, but in the secondary market, the regulator capped the ownership to 10 per cent in a single listed company, up from the previous ceiling of 5 per cent.
Last June, Saudi Arabia, the biggest regional market in terms of market capitalisation, allowed foreign investments into its capital markets, and since then has been relaxing rules by lowering the total assets under management to attract more capital.
