Global banks begin trading under new Saudi rules

Dubai: Major investment banks said yesterday that they have begun trading under new rules by Saudi Arabia that allow foreigners their first-ever access to individual stocks listed on the kingdom's exchange, the largest in the Middle East.

Saudi authorities announced the major policy shift a week ago, but it was uncertain when trading would begin.

Investors previously could invest in Saudi stocks only through locally run mutual funds - a restriction observers said limited outside investment in the kingdom.

"This effectively allows international investors to pick and invest in a single stock or a couple of stocks as they please," said Jamal Al Kishi, chief executive of Deutsche Securities Saudi Arabia, a subsidiary of Deutsche Bank.

Deutsche Securities and the Saudi arm of Morgan Stanley said they began making trades under the new rules on Tuesday.

The head of HSBC Holdings's Saudi subsidiary said the bank also began making similar trades yesterday.

Other large banks are expected to follow suit.

Under the new regulations, foreign buyers can enter into transactions known as swap agreements with local branches of investment banks. The arrangement lets investors take advantage of movements in Saudi shares even though they are prohibited from owning them outright.

Some 60 companies are authorised to carry out swap trades on the Tadawul exchange. Most buyers are likely to be large institutional investors, industry experts said.

Al Kishi said the new policy should help increase investment in the Saudi stock market.