Saudi Arabia is finalising a regulatory framework which will allow foreigners to directly own stocks in the kingdom, though the market has no need for liquidity from international investors, the head of the country's market regulator said.
"There are a number of government entities, including CMA, that are looking at that (direct foreign investment). We're finalising a regulatory framework with certain parameters," Mohammed bin Abdulmalik Al al-Sheikh, appointed head of the Capital Market Authority in February, said on Tuesday.
"We are attracting foreign investment to come to the market for the technical expertise and human capacity," he said without giving any time frame for the reform, which officials have been considering for years.
Currently, foreign investors can only buy shares in the largest Arab market through swap deals involving international investment banks, and via a small number of exchange-traded funds.
The regulator is also trying to limit "high levels of speculation" in the stock market, Al-Sheikh, previously a World Bank official, said on the sidelines of a conference.
"The CMA should put a limit on this manipulation to safeguard investors. We are currently trying to address this issue."
Al-Sheikh said the CMA and other government bodies intended to encourage institutional investment in the market by diversifying investment instruments and funds, including sukuk (Islamic bonds) and other debt tools.
"CMA is developing a strategy to promote institutional trading on the tadawul," he said, adding: "While out of the total 47 billion stocks listed 45 percent are held by individuals, nearly 93 percent of daily trading is done by retailers."