Saudi Stock Market: We’re Open For Business-Sort Of..

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BrokerDealer.com and the rest of the investing world have all eyes on the $580bil Saudi Arabia Stock Market as it opens its doors today to foreign investors for the first time. The initial opening will be restricted however; only foreign investment managers with at least $5bil AUM will be able to execute orders and no foreign investors can make bets on Saudi companies serving national security interests or operating in designated holy locations.

 

saudi stock marketAs reported by Traders Magazine John D’Antona Jr.,  In a move designed to bring more money into the Royal Kingdom and diversify the country away from its traditional oil industry and expose it to the international finance system, Saudi Arabia is opening its stock market to outsiders.

Currently, the country’s stock market, with a market cap of $580 billion – the biggest in the Middle East- is open only to large domestic institutional investors, according to a report in the Wall Street Journal. Up until now, Saudi and select Gulf countries could buy and sell shares. Also, a limited amount of foreign investors who wanted exposure to the country’s companies could execute in the country but had to had to go through a Saudi regional broker dealer. Now, investors can go directly into the market and execute their orders.

The opening of the country’s market comes at a time where the Kingdom is looking to move away from an oil-centric economy – which lately has been battered by the low price of oil and weak global demand. Also, with a softening of the country’s Muslim conservative bent officials felt opening their country to foreign money would be more permissible.

As of today’s Saudi stock market opening, the Journal said that only large global institutional investors, with at least $5 billion in assets under management, can execute buy orders. This limited opening of the market is viewed as bringing only the very savvy and stable investors the market needs at this stage of its development.

And foreign participants are going to have limits – as they cannot invest in Saudi companies that are closely linked to the country’s national security interests or companies located in holy locales, such as Mecca.

“There are many reasons to open the market and to do it gradually, but liquidity is not one of them,” said Mohammed Aljadaan, president of the Capital Market Authority, to the Journal. The CMA regulates the stock market.

Investors’ Anticipation Grows As They Wait For Tadawul To Become Public

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Brokerdealer.com blog update profiles the much anticipated wait for the Tadawul market to foriegn investors. The Tadawul market is the Saudi stock market that has always been closed off to foreign investors. Much speculation has led many investors to believe that Tadawul should open by April. The update is from Institutional Investors, and here is a snippet from their article:

Anticipation is growing that a long awaited opening of Tadawul, the Saudi stock market, to foreign investors will come as early as next month. Analysts believe the move will provide fresh momentum for the $500 billion market, which has risen by nearly 30 percent since mid-December. “This will be the event of the year in emerging markets,” says John Sfakianakis, a veteran economist and investment strategist in Riyadh who opened an office there in September for the London-based emerging markets specialist Ashmore Group.

Oil was trading at more than $100 a barrel in July when the government first announced its intention to open the market at some point in 2015. Since then the Tadawul has been on a roller coaster ride, hitting a peak of 11,149 in early September, then plunging more than 34 percent over the next three months as oil prices collapsed before staging a recovery. The partial rebound of oil prices since January has helped. So has the government’s ability to draw on its $750 billion in reserves, which has helped keep the economy flush.

Growth has slowed but remains positive. The International Monetary Fund projects that the economy will expand by 2.8 percent this year, down from 3.6 percent in 2014. Nonoil sectors, which account for virtually the entire stock market, should expand by 5 percent, says Bassel Khatoun, Franklin Templeton’s head of equities for the Middle East and North Africa, based in Dubai.

To read the full article from Institutional Investors on the Saudi Arabian stock market’s opening, click here.