Saudi Arabian stock market opens doors to foreign investors

Middle East's largest economy to allow direct foreign investment in Saudi-listed entities

Photo by: Reuters
Photo by: Reuters

Updated Jul 28, 2015

Saudi Arabia, known for one of the world's most restricted exchanges, will allow foreign investors to trade directly through its $530 billion stock market starting from June 15, announced Capital Market Authority (CMA) on Thursday.

The new regulation, which is expected to diversify the country’s highly oil dependant economy, was first revealed towards the end of 2014. Saudi officials took the next step in August, by publishing draft rules for public consultation, which will lead to a spur in foreign currencies entering the nation. After publishing final regulation rules on direct foreign investment on May 4, it will finally be enforced on June 1.

“The CMA has reviewed comments and observations received in this regard, coordinated with concerned governmental parties, and received the Saudi Stock Exchange’s [Tadawul] confirmation of its readiness,” said an official.

However, the regulation limits for foreign investments are still unknown.

Saudi Arabia is currently home to one of the most liquid stock markets while having the most active public offerings (IPO) market in the region. Their exchange index, Tadawul, generally consists of well-capitalised global companies such as petrochemicals conglomerate Sabic and the Islamic banking group Al Rajhi.

Saudi Arabia’s $576 billion equity market is larger than those in Russia, Malaysia, Mexico and Indonesia, according to the Financial Times.

The oil rich country first opened its doors to foreign investors in 2008 when it gave indirect access to its equity market through swaps.

The recent spiral in oil prices caused by the shale boom and geopolitical tensions has worried investors however, CMA’s notice on Thursday mirrors the country’s stability as they allow outsiders to directly invest in its stock market.

TRTWorld and agencies