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Tue 20 Mar 2007 02:00 PM

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Firm to run Tadawul prior to IPO

Saudi has set up a company to run its bourse, paving the way to a public offering.

Saudi Arabia on Monday approved the establishment of a state-owned company to run the Saudi bourse, paving the way for an initial public offering of the Arab world's largest stock exchange.

The joint-stock firm, called Tadawul, would be responsible for stock transactions, registration of ownership and publication of information about listed companies, a cabinet statement carried by the official news agency SPA said.

Saudi Arabia, the Arab world's largest economy, is moving toward developing a modern, transparent stock exchange after a crash last year erased more than half of its value and shook investor sentiment.

"The measure aims at separating the legal, organisational and regulatory responsibilities to improve the trading climate on the market," SPA quoted Abdulrahman al-Tuwaijri, head of the Capital Markets Authority, as saying.

The move will "have a positive impact on the Saudi securities market," Tuwaijri said.

The cabinet did not say when Tadawul, which will have 1.2 billion riyals ($320 million) of capital, wholly owned by the state General Investments Fund, would sell shares in an IPO.

Saudi-owned daily newspaper Asharq al-Awsat, which first reported details of the planned company in January, said then that a stake could be offered to the public within two years.

Dubai's stock exchange became the first in the Arab world to sell its own shares in a public and private offering in November, when the government of the emirate gave up a 20% stake.

"Part of the company's shares will be offered to the public in an IPO at a date decided by a shareholders' general meeting," the cabinet statement said.

Like others in the Gulf Arab region, Saudi Arabia's market has been tainted by allegations of insider trading and manipulation of stock prices.

The CMA last year issued regulations to curb such practices, saying in December it was investigating 25 cases, including alleged fraudulent transactions.