Saudi Arabia to open bourse to foreigners

RIYADH / DUBAI- Reuters

Saudi King Abdullah is seen in this file photo. Saudi Arabia has announced long-awaited plans to open its bourse to foreign direct investment.

Saudi Arabia plans to open its stock market, the Arab world’s biggest, to direct investment by foreign financial institutions in the first half of next year, the market regulator said July 22.

The opening of the Saudi market, capitalized at about $530 billion, is one of the most keenly awaited economic reforms in the world’s biggest oil exporter. The bourse would be one of the world’s last major exchanges to begin welcoming foreign money.

“The market will be open to eligible foreign financial institutions to invest in listed shares during the first half of 2015, with God’s permission,” the Capital Market Authority said in a statement.

Saudi authorities want to open the stock market to create jobs, diversify the economy beyond oil and expose local firms to more market discipline. They have been preparing the reform for years and have completed most technical preparations.

But the government has delayed implementing the reform, apparently concerned about causing volatility in the market as well as the political sensitivity of allowing foreigners to build large stakes in top Saudi companies.

Currently, foreigners are limited to buying Saudi stocks via swaps involving international banks and through a small number of exchange-traded funds, which are relatively expensive and inconvenient options.

Foreigners are at present believed to own no more than about 5 percent of the Saudi market, and to account for a smaller fraction of stock trading turnover.