Bloomberg News

Saudi Regulator Said to Discuss Opening Market in Early 2012

November 02, 2011

(Updates with closing prices in sixth graph.)

Oct. 24 (Bloomberg) -- Saudi Arabia’s Capital Market Authority is in discussions with international banks to open the country’s stock exchange to foreign investors early next year, three bankers familiar with the matter said.

The market regulator is working with the banks to prepare for the introduction of foreign investors to the region’s largest stock market as early as the first quarter of 2012, said the bankers, who declined to be identified because the discussions are private.

Foreign, non-Persian Gulf investors currently can’t directly invest in Saudi shares. The kingdom allowed citizens of neighboring Gulf countries to buy and sell shares freely in 2007. Non-resident foreigners are permitted to trade through share-swap transactions and exchange-traded funds, with the market regulator approving the first ETF in March 2010.

“We find the Saudi Arabian market very attractive and would definitely be interested in investing; it’s a much larger and deeper market compared to others in the region,” said London-based Sven Richter, managing director and head of frontier markets at Renaissance Asset Managers, which oversees more than $2 billion. “In the past we have invested in Saudi Arabia, but the restrictions created more complexity.”

A spokesman for the Capital Market Authority wasn’t immediately able to comment and the media relations officer at the stock exchange declined to comment when contacted by Bloomberg News.

MSCI Inclusion

The benchmark Tadawul All Share Index fell less than 0.1 percent to 6,132.25 at the 3:30 p.m. close in Riyadh today. The measure has dropped 7.4 percent this year, while the MSCI Emerging Markets Index is down 18 percent in the same period.

An opening up to investors “would be a positive and interesting development if it does happen,” said Mohammed Ali Yasin, chief investment officer at Abu Dhabi-based financial services company CAPM Investments PJSC. “It may help with Saudi inclusion in the MSCI indexes and could then provide it with more liquidity.”

MSCI Inc., whose stock indexes are tracked by investors with about $3 trillion in assets, classifies all seven Persian Gulf’s bourses except Saudi Arabia’s as frontier markets.

The Saudi stock exchange, which isn’t classified, is in talks with MSCI on a possible inclusion in its indexes, Chief Executive Officer Abdullah Al-Suweilmy said Oct. 18.

‘Most Attractive’

The region’s exchanges are taking steps to improve their chances of being reclassified as emerging-market status. MSCI will reevaluate the frontier-market status of Qatar and the United Arab Emirates in December. The designation typically applies to economies and financial markets that are less developed than emerging markets and that have more restrictions on foreign ownership.

Saudi Arabia “could prove to be one of the most attractive countries in the region for foreign investors,” Renaissance’s Richter said.

ETFs are index-based investment products that allow investors to buy or sell shares of entire portfolios of stock in a single security. ETFs are unique in that they combine the opportunities of indexing with the advantages of stock trading.

--With assistance from Mourad Haroutunian in Riyadh. Editors: Claudia Maedler, Maher Chmaytelli

To contact the reporters on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net; Stefania Bianchi in Dubai at sbianchi10@bloomberg.net

To contact the editors responsible for this story: Claudia Maedler at cmaedler@bloomberg.net; Edward Evans at eevans3@bloomberg.net


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