Saudi Arabia will allow overseas companies to list
securities on the Arab world’s biggest bourse, fueling speculation the country
may open to foreign investors.
“It’s a good step, a step closer to further opening the
market to foreign investors,” said Turki Fadaak, head of research at
Riyadh-based Albilad Investment Co. “At this stage, current investors will
trade stocks listed by foreign issuers, and in later stages, foreign investors
too will be trading these shares.”
Securities that are listed on another exchange with at
“least equivalent” rules to those in Saudi Arabia can apply for a dual listing
in the kingdom, the rules posted on the Saudi Arabian Capital Market
Authority’s website Sunday said.
The country doesn’t permit foreigners to directly own shares
in its listed companies. The government allowed citizens of neighbouring Gulf
states to buy and sell local shares in 2007. The nation’s benchmark Tadawul All
Share Index has a market value of about SR1.28 trillion ($341bn).
Saudi Arabia hasn’t set a time-line for opening its market
to foreigners, stock exchange Chief Executive Officer Abdullah Al-Suweilmy said
last month. The kingdom’s market regulator is in discussions with international
banks to open the exchange to foreign investors in the first quarter, three
bankers familiar with the matter said in October.
Non-resident foreigners are permitted to trade through
share-swap transactions and exchange-traded funds, with the market regulator
approving the first ETF in March 2010.
Saudi Arabia’s stock market may gain frontier market status
at MSCI Inc. “quite quickly” if it opens up to foreign investors in the first
quarter, HSBC Holdings said in a report earlier this month. An inclusion at
the index provider may also pave the way for an upgrade to emerging market
status, HSBC said.
MSCI classifies six of the Gulf’s seven bourses as frontier
markets, a designation that typically applies to economies and financial markets
that are less developed.
The 150 companies on Saudi’s benchmark trade at 10.8 times
estimated earnings. That compares with 12.6 times for the S&P 500 Index.