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Mon 11 Aug 2008 06:04 PM

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Morgan Stanley's Saudi fund plan approved

Kingdom's stock market regulator's move aims to attract more foreign investment.

Morgan Stanley will be allowed to set up a fund to invest in Saudi equities, Saudi Arabia's stock market regulator said on Monday, in a move that could attract more foreign investors' to the largest Arab bourse.

The world's biggest oil exporter places restrictions on investors from outside the region buying shares, allowing only investors based in one of the five other Gulf states to invest directly in stocks.

In a move designed to help the kingdom develop its financial markets, the Saudi Capital Markets Authority (CMA) said in a statement on the bourse website it would allow Morgan Stanley to set up a fund to invest in Saudi stocks.

The regulator said last December the kingdom would gradually begin allowing foreign money in through licensed firms.

That month, HSBC said it was launching two indexes and associate funds to give global investors exposure to firms including Saudi Basic Industries Corp (SABIC), the world's biggest chemicals firm by market value.

Gulf countries are easing restrictions on foreign investment after a share market rout in 2006, when four of the region's seven stock benchmarks lost most than 35 percent of their value.

Regulators hope foreign institutional investors will eventually overtake domestic retailers as the main drivers of trading, making their markets less volatile.

The Saudi index is the worst-performing Gulf Arab benchmark, down almost 27 percent so far this year.

In a move to improve transparency, the Saudi market operator said last month it would name investors with stakes of 5 percent or more in listed firms beginning August 16. (Reuters)

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