KSA market leadership spotlighted

16/06/2015 08:07 AST

Saudi Arabia's stock exchange allowed foreign investors to trade shares for the first time Monday, boosting the Kingdom’s efforts to become a major global capital market.

The Kingdom's entry into international market indexes could eventually attract tens of billions of riyals of additional foreign money, say Riyadh-based analysts.

International players will bring more sophisticated investment practices and help develop the Kingdom’s capital markets, they said.

The Kingdom, which is part of the G-20 group of the world's largest economies, already has good liquidity and high foreign exchange reserves.

Adel Al-Ghamdi, CEO of Tadawul, told Reuters he expected a flurry of licenses allowing the first foreign investors to buy shares in coming weeks.

HSBC, meanwhile, declared that it had obtained a license to invest and traded shares on Monday.

The foreign investor’s announcement followed Al-Ghamdi’s earlier remarks that regulators were processing six applications.

The stock market fell on Monday as modest trading volumes indicated there were no big fund inflows from abroad on the first day that the market, valued at $585 billion, opened to direct foreign investment. After rising as much as 0.5 percent in the opening minutes, the Tadawul All-Share Index closed 0.9 percent lower.

“The opening up of the market is very important because Saudi Arabia has both the scale and wealth and they are among the few within the Emerging Market space that can command such prowess,” commented John Sfakianakis, Middle East director at Ashmore Group.

“The event of Saudi Arabia opening up is a very positive development for the entire Gulf region, as it graduates to becoming an investment destination for emerging-market funds,” he told Arab News.

Sfakianakis, however, does not expect a big influx of foreign investment right away. He expects a gradual flow over the next few years of $20 billion to $25 billion.

Yazan M. Abdeen, lead MENA fund manager and head of MENA Liquid Assets at SEDCO Capital, commented: “The interest in the Saudi stock market will build up to become enormous over the course of the coming two years as Tadawul makes its way into an emerging market status, due to the country’s strong economy and growing capital markets.”

Arab News