By Courtney Trenwith
Shoura Council reportedly calls for independent review of the Capital Market Authority ahead of the opening up of stock market
Saudi Arabia’s Shoura Council has urged the kingdom’s share market watchdog, the Capital Market Authority (CMA), to take measures to avoid another crash similar to the one in 2006 when $500bn was wiped off the value of the Tadawul.
The warning comes as the CMA prepares to open up the index – the largest in an Arab country - to direct foreign investors for the first time.
Draft regulations are yet to be released but it believed foreigners will be limited to 15 percent of the total market value and will not be allowed to invest in firms that have operations in the holy city of Makkah.
It is expected to be implemented in early 2015 and already the announcement has had a positive effect on the Tadawul, which rose immediately after as local investors expect foreign direct investment to improve stock values.
In a meeting this week, the Shoura Council ordered a independent evaluation of the CMA, its impact on the stock market and whether it was achieving its basic goals, assistant president Fahad Al Hamad told Saudi Gazette.
It also called on the CMA to review the performance of brokerage companies to ensure fair competition.