CAPITAL MARKETS | MIDDLE EAST EQUITY
Riyadh, the Saudi capital, has already built a new financial district, named after King Abdullah, but its 42 new skyscrapers stand largely empty. That could change following the decision by the government in July to allow foreign financial institutions to invest directly in listed shares, starting in the first half of 2015.
The Saudi stock market, known as the Tadawul, is the largest equity market in the Middle East and North Africa. Its 167 listed companies have a combined market capitalization of more than $530 billion.
“The opening of the Saudi stock market would be a major positive for the MENA region,” says Aleksandar Stojanovski, analyst at Deutsche Bank. The kingdom’s stock market offers a diversified sector base, with such blue chips as Saudi Basic Industries, one of the world’s largest petrochemical companies, and Al Rajhi Bank, the world’s largest Islamic bank.
The country’s Capital Market Authority has drafted proposed rules that will limit access to qualified foreign financial institutions with at least $5 billion of assets under management. The CMA hopes that sophisticated long-term investors will help to stabilize the market, which is dominated by retail investors. It will likely also encourage an influx of foreign firms to set up shop in the country.