Riyadh: Saudi Arabia’s stock exchange allowed foreign investors to trade shares for the first time on Monday, boosting efforts by the world’s top oil exporter to become a major global capital market.
Foreign banks, brokerage houses, fund managers and insurance companies based outside the Gulf can now invest directly on the Tadawul All-Shares Index (TASI), provided they meet the requirements.
The Capital Market Authority, its chief regulator, said the move was aimed at the making the Saudi exchange — the biggest in the Arab world — a global player.
The goal is “to become a leading market” and move towards obtaining “emerging” status on global indices, CMA spokesman Abdullah al-Kahtani said.
The market’s capitalisation of about $560 billion is more than all of the Gulf’s other exchanges combined.
Analysts estimate foreign investment in the market could eventually reach $40-$50bn, but say the new rules are not about bringing in more money to a country that already belongs to the G20 group of the world’s largest economies.
Instead, they say, the main payoff from attracting foreign institutional investors will be improved transparency, accountability, and availability of macroeconomic data, alongside reduced market volatility.
The measures “could be seen as the first step in a broader liberalisation” of the economy in a country traditionally cautious about foreign political and economic influence, the Capital Economics research group wrote.
Foreign investors could already enter the Saudi market indirectly, and founding foreign owners of joint firms, such as The Saudi British Bank, were also permitted.
Analysts did not expect a sudden rush of foreign funds, which will be tightly controlled. To be registered as a Qualified Foreign Investor (QFI) allowed to trade on the exchange, an overseas institution must have a five-year track record, with at least 18.75bn riyals ($5bn/4.5bn euros) under management.
