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Tue 2 Jun 2015 05:11 PM

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Ashmore set to apply for Saudi investing licence

Company seeks licence to trade stocks on the $566bn market as foreigners will be allowed to own shares directly for first time

Ashmore set to apply for Saudi investing licence

Emerging markets-focused investment firm Ashmore Group expects to lodge an application to invest directly in the Saudi Arabian stock market by the end of this week, its finance director told Reuters.

The Gulf Arab kingdom began accepting applications from institutional investors on Monday for a licence to trade stocks on the $566 billion market, the first time foreigners will be allowed to own shares directly.

"Ours will go in at some point this week," Tom Shippey, group finance director at Ashmore, told Reuters.

"We always try and be at the forefront of accessing these markets for clients. Clearly, the opening up of the market is a good thing, we think, for us."

The decision to open the Saudi market has created significant excitement as it is one of the last major bourses to open up to direct foreign investment.

Previously, foreign investors could only access Saudi shares through swap agreements, whereby stocks were bought by a locally-approved entity on their behalf, and through exchange-traded funds.

However, expectations of huge international capital inflows have been dampened, given the high valuations of Saudi stocks and restrictions placed on entry by the kingdom's authorities.

Bankers expect perhaps no more than a dozen licences to be awarded in the first round of applications, which is due to close on June 11.

"I think it will grow in terms of importance, (but) ... the flood gates will not suddenly open on Day 1 and everyone will all pile in. I think it'll be a little more cautious than that," said Shippey.

Ashmore launched its operations in Saudi Arabia, its first base in the Middle East, at the start of the year.

It recruited prominent investment strategist John Sfakianakis, a former chief economic adviser to the Saudi finance ministry, to head its Gulf business.

The licence to establish an onshore manager in Saudi Arabia was granted in April 2014, and Ashmore gained regulatory approval for its first mutual funds in January 2015. It has launched a number of funds focused on equities, including a fund which invests in initial public offerings.

"It took a little bit longer than we'd hoped to get the licence, but we got that at the beginning of January, we got the funds launched (and) local fundraising is going quite nicely," said Shippey.

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