If the last few years in Saudi Arabia will be remembered as years of impressive economic growth, look for 2012 to be a year of “opening” for the Kingdom.
The investment, aviation, and tourism sectors are all set for major changes to the status quo in 2012 after years of anticipation by foreigners to break into these lucrative markets in Saudi Arabia.
Perhaps the most significant and highly anticipated of these openings is in the opening of Saudi Arabia’s stock market, also known as the Tadawul or TASI (Tadawul All-Share Index). Foreign investors have long awaited the opportunity to invest directly in the Kingdom by buying and selling shares on the Saudi Stock Exchange, but have been prohibited from doing so due to Saudi regulations.
That all looks set to change.
In late 2011, a number of Saudi Arabia’s leading businessmen predicted that the TASI would open up to foreigners within a year.
Reuters reported on December 10th, 2011 that Saudi Arabia would “pen up its stock market will limit direct foreign ownership to investors with at least $5 billion under management and allow each to hold a maximum 5 percent of a stock’s issued share capital,” citing two industry sources.
The Tadawul All-Share Index in Saudi Arabia
Shortly after this report, Saudi Arabia’s King Abdullah executed a “mini” cabinet reshuffling, focusing on his economic leaders. Fahad al-Mubarak was appointed as governor of the central bank, replacing Muhammad al-Jasser, who became the new Economy and Planning minster. Tawfiq al-Rabea replaced Abdullah Alireza as Minister of Commerce and Industry.
On January 8, 2012, Beshr Bakheet, the chairman of the Bakheet Investment Group, gave an interview with Arab News and discussed the opening of the Saudi Stock market. When asked, Bakheet said that the opening would be great for the Kingdom’s market and overall economy:
ARAB NEWS: Saudi Arabia has been considering opening up its stock market for several years. Currently, foreigners have only very limited opportunities to invest through indirect ownership and exchange traded funds that track indexes. What impact you expect after the wider market opening?
BAHKEET: Allowing foreign investors to participate and invest in Saudi market will definitely increase the market liquidity in general which in turn minimize the transactions cost and increase the market efficiency. In essence, this will boost and generate new innovative investment products by foreign investors. Having said that foreign investors might also increase volatility and market risk thereby increasing the correlation between Tadawul and world indices.
On January 22nd, 2012, reports surfaced that Saudi Arabia would allow foreign companies to list securities on the Tadawul. The move “may help the region’s equity markets lure investors and boost trading volumes,” Bloomberg reports.
“Securities on another exchange with comparable listing rules to those in Saudi Arabia can apply for a dual listing in the kingdom, according to new regulations posted on the Saudi Arabian Capital Market Authority’s website yesterday. The country currently doesn’t permit foreigners to directly own shares in its listed companies. The government allowed citizens of neighboring Persian Gulf states to trade in shares in 2007.”
While Saudi Arabia has not yet set a time frame for the opening of its stock exchange to foreigners, recent moves by the Kingdom suggest that the government is preparing the Arab World’s largest economy to open up in 2012.
