A portrait of Custodian of the Two Holy Mosques King Salman is displayed at the Saudi Stock Exchange (Tadawul) on Monday in Riyadh as Saudi Arabia’s stock exchange allowed foreign investors to trade shares for the first time. — AFP

 

Saeed Haider

Saudi Gazette

 

DAMMAM — The market reacted cautiously to the opening of the Tadawul All-Shares Index (TASI) to foreign investors. Foreign banks, brokerage houses, fund managers and insurance companies based outside the Gulf can now invest directly provided they meet the requirements.



“A start has been made in right direction and with time it will become smoother with lesser barriers and fewer strings,” said an excited Tareq Al-Dosarry, a stock market dealer who believes that Saudi Arabia has now entered a new era and established a proper connect with world economy.



Private investors as well as financial institutions and business portfolio management companies welcomed the move saying that it will attract foreign capital and reduce the burden on government spending.



However, some of them advised a  “wait and watch” approach. The general perception in stock trading companies was that the opening of the equity share market to foreign investors will allow the Kingdom to attract tens of billions of dollars in fresh investment, easing the pressure on the government to support the private sector.



“It is a wise move in the right direction. I must admit it was long due. We are among the last to open the market,” said Abu Hilal, owner of a investment company in Al-Khobar.



An executive of Al-Istithmar Capital described the decision as historic. “The listed companies will now have access to international expertise and a more diversified and stable source of capital. It will enhance our professionalism and give a fresh approach to market economy,” he said.



Saleh Al-Humaidan, leading business executive and financial expert in the Eastern Province,  called the move timely, especially when oil prices are declining.



“There is no denying the fact that Saudi bourse is the largest in the Middle East and North Afgrican(MENA) region and its opening will not only attract major foreign investment but will also reflect a confidence in the Saudi economy,” he said.



An Indian CEO of a joint venture company in  Jubail Industrial City said there were multiple pre-conditions before a foreigner could qualify to buy share.



Only institutions that manage $5 billion of assets with a five year investment record will be given the green light for now. Tadawwul holds the right to bring down asset limit from $5 billion to $3 billion.



In addition no investor can hold more than 5 percent of a company and overall foreign ownership of that company cannot be more than 49 percent.



Foreign investors were already able to enter the market indirectly, and founding foreign owners of joint firms, such as The Saudi British Bank, were also permitted.



The market’s capitalization 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-$50 billion, but say the new rules are not about bringing in more money.



“We don’t need that in the Saudi market,” Mazen Al-Sudairi, head of research at Alistithmar Capital, was quoted as saying by a news agency.



He said the kingdom, which is part of the G20 group of the world’s largest economies, already has good liquidity and high foreign exchange reserves.