By Ulf Laessing
Arabia's biggest bourse is studying new ways for foreign investors to enter market.
Saudi Arabia wants to further open up the Arab world's largest bourse to foreign investment and has considered exchange traded funds (ETF), the head of the Capital Market Authority (CMA) said in newspaper interviews.
In 2008, the word's top oil exporter and OPEC member allowed so called swap agreements between non resident foreign investors and local intermediaries, permitting indirect foreign ownership on the bourse.
Previously, foreigners could enter the Saudi stock market only through selected funds.
But large international investors such as pension funds have held off investment on a large scale pending further steps to allow entry to the market and hope for eventual full ownership.
In an interview with al Watan newspaper, Adulrahman al Tuwaijri, chairman of the CMA, said: "We want to study new ways through which the foreign investor can enter."
Without adding further details, he said: "We're moving towards entry of foreign investors through exchange traded-funds (ETFs)."
Such funds track securities such as shares, a stock market index or other asset classes such as bonds and are typically daily priced like a mutual fund.
Tuwaijri said foreign funds played an important role in stabilising the market but there were also risks involved and any further steps to open up should not have a negative impact on the bourse.
He added: "It's correct that foreign investment has many benefits but at the same time there is the risk of hot money getting in and then pulled out in large sums."
He said some liquidity had been pulled out of the Saudi bourse like in neighbouring markets as a result of global turmoil but the bourse was otherwise in good shape.
Tuwaijri said: "The current situation shows the market is stable, a stability that is the result of a rise in confidence."
The Saudi bourse may add a "sports" segment for listed firms after privatisation of clubs, Tuwaijri added. (Reuters)