Saudi Arabia opens up protected stocks to Gulf Arabs

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More institutional traders are gradually heading to the Tadawul, along with more investors from the GCC states.

Saudi Arabia's financial sector is making progress with its liberalisation, but still needs to attract more GCC institutional investment, according to the chief economist of a Saudi investment bank.

At the end of August, Saudi Arabia's cabinet ordered the Capital Market Authority (CMA) to remove constraints on investors from the other GCC states, giving them equal status to Saudi investors.

Previously, several stocks, including banks, had protected status and could only be traded by Saudi nationals.

Brad Bourland, chief economist, Jadwa Investment Bank, welcomed the latest move, but said that the institutional investor base was still developing.

"There are institutional investors and family conglomerates that never sell anything," Bourland said. "The daily trading is largely retail."

He added: "The natural evolution will see the institutional investor base grow, with more mutual funds."

Earlier, the CMA had lifted restrictions on expatriates within the Kingdom trading on the Tadawul. However, Bourland said he did not expect this to have a major effect on the stock exchange, since the majority of foreign workers had relatively low incomes.

Bourland also said that the Tadawul was a very attractive destination for investors, since there are currently some "hidden gems" offering high dividends and trading at a relatively low price-to-earnings ratio.

"It's a very nice investor's market," he said. "It's a post-crash market in a very strong economy."

Law firm Baker & McKenzie last month advised Kingdom Holding Company on its forthcoming IPO, which is expected to raise $860m.

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