Saudi Arabia wants to attract more foreign investments to its bourse but is unlikely to fully open up the biggest Arab bourse and allow full ownership anytime soon, executives told the Reuters Middle East Investment summit.
The Saudi bourse, the region's largest and most liquid stock market has gradually opened up to foreigners but does not allow foreign funds to directly own and trade Saudis shares.
Hisham Tuffaha, head of investment research and financial analysis at Saudi investment bank Bakheet Investment Group said: "I don't think they will do anything soon."
Earlier this year, Saudi Arabia allowed local brokerages to launch exchange traded funds (ETFs) after granting foreign share ownership via swap agreements in 2008.
But foreign presence still amounts to only a fraction of trading dominated by Saudi retail investors.
With the top oil exporter rolling out a $400 billion infrastructure spending programme, the world's largest stimulus plan relative to GDP, global banks have started covering Saudi stocks and are upbeat about growth prospects.
A fast rising young population promises strong consumer growth for many years, helping sectors such as food firms, retailers, banks and construction firms.
Saudi authorities seem to be worried about hot money coming in from abroad and causing havoc in the Saudi bourse which despite its size does not react much to global market trends, Tuffaha said.
Hesham Abu Jamee, chief investment officer at Bakheet, one of the biggest retail fund firms in the kingdom said: "They worry about speculation. They will wait with anything until global markets have further stabilised."
John Sfakianakis, chief economist at Saudi Banque Fransi, said there was some resistance inside Saudi authorities to further open up the stock market.
He said: "If there wasn't the worry about hot money there would be other reasons not to do it."
Saudi King Abdullah has tried some economic reforms to create jobs for the fastly rising native population but needs to act cautiously as the powerful religious elite opposed opening up the kingdom to the world.
Abu Jamee added that only foreign funds could help lift the Saudi bourse back to levels seen before a crash in 2006 as many retail investors have burned their fingers and would not return.
He said: "Only foreign funds could do that."
Paul Gamble, head of research at Saudi investment bank Jadwa Investment, said: "It would give the momentum it needs. The market is below its potential." (Reuters)
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