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Thu 1 Oct 2015 10:09 AM

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Citigroup, Ashmore approved to buy Saudi stocks directly

Kingdom opened its $442bn equity market, the largest in the Arab world, to direct investment by foreigners on June 15

Citigroup, Ashmore approved to buy Saudi stocks directly
(Getty Images)

US bank Citigroup Inc and emerging markets-focused investment manager Ashmore Group have won permission from the Saudi Arabian regulator to invest directly in the local stock market, industry sources said on Wednesday.

The kingdom opened its $442 billion equity market, the largest in the Arab world, to direct investment by foreigners on June 15 this year as part of efforts to create jobs and diversify its economy beyond oil.

Foreign institutions must obtain licences to invest directly, meeting criteria for size and experience. HSBC Holdings obtained a licence in June; one source told Reuters that a total of six institutions had now been given licences, but he declined to name the other three.

The Capital Market Authority has not released the names of licensed institutions. Asked to comment on Wednesday, CMA spokesman Abdullah Al Kahtani said: "The CMA's policy is to disclose ownership percentages for each type of investor on a daily basis, while it only discloses investors' names when ownership exceeds 5 percent."

A regional Citigroup spokesman in Dubai declined to comment.

The bank's licence marks a step towards rebuilding its presence in Saudi Arabia. After operating there for five decades, Citigroup pulled out in 2004 when it sold its 20-percent stake in Samba Financial Group, saying it was reallocating capital to core investments.

It is not clear whether Citigroup will now seek to develop major Saudi operations by, for example, seeking a banking licence. But a Saudi official said earlier in September that there might be new opportunities for foreign banks to enter the kingdom, as most banks already operating there were nearing maximum credit limits imposed by the central bank.

Fund managers think the Saudi stock market could eventually attract tens of billions of dollars in new foreign investment, but since June 15 inflows have been tiny, partly because low oil prices have at least temporarily clouded the outlook for the market.

Total foreign ownership of the market, including licensed foreign institutions and their clients as well as indirect investment through swaps, amounts to just 1.11 percent, according to stock exchange data. This figure excludes investment by resident foreigners and citizens of neighbouring Gulf states.

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