Saudi Arabia will open its stock market to foreign investors next year, according to the Capital Market Authority (CMA), the country’s securities regulator.
Foreign financial institutions will be allowed to buy and sell stocks on the exchange, which has a market capitalization of about $530 bn, in the first half of next year, the regulator says in a statement on its website. The CMA says it will publish regulations regarding foreign investment next month.
The stock market, the largest in the Middle East, has been open to foreign investors only indirectly, through swaps and exchange-traded funds, since 2008. The market includes stocks of companies such as Saudi Electricity Company, telecommunications company Etihad Etisalat and Samba Financial Group, among others.
Authorities will ‘solicit opinions and suggestions from general investors and interested parties for a period of 90 days,’ the CMA says. It will then review the input and consult with Tadawul, the Saudi stock exchange, and relevant government agencies before passing the final regulations.
The Tadawul All Share Index surged by 3 percent on news of the development and has gained more than 20 percent so far this year as Saudi economic growth outstrips that of other countries in the region. Trading volume on the exchange averages about $2 bn a day.
Liberalization of foreign investment rules in Saudi Arabia is expected to immediately draw a surge in investment and further boost the market’s stock prices. In May, MSCI upgraded the markets in Qatar and the United Arab Emirates to ‘emerging market’ status from ‘frontier market’ status. The Qatar market is now about 15 percent owned by foreign investors, by market capitalization.
