Saudi bourse opens door to short sell­ing

New Straits Times - - Business -

DUBAI: Saudi Ara­bia, the Mid­dle East’s largest share mar­ket, be­came the first in the re­gion to in­tro­duce short sell­ing last month. In­vestors have yet to test the waters.

Al­low­ing the sale of bor­rowed se­cu­ri­ties is among steps the coun­try is tak­ing to make its mar­ket more at­trac­tive as it closes in on an up­grade to emerg­ing-mar­ket sta­tus and read­ies a record ini­tial public of­fer­ing for state oil com­pany Saudi Aramco. Still, since au­tho­riz­ing short sell­ing on April 23, reg­u­la­tors over­see­ing the US$438 bil­lion (RM1.89 tril­lion) Saudi stock mar­ket are still to record the first trans­ac­tion.

Given the dom­i­nance of re­tail in­vestors across the re­gion, the cau­tious ap­proach could be un­der­stand­able. Few mar­kets pro­vide trad­ing in fu­tures or op­tions con­tracts on stocks, for ex­am­ple.

The prac­tice “would at­tract some new in­vestors and pro­vide ad­di­tional liq­uid­ity”, said Ak­ber Khan, se­nior di­rec­tor of as­set man­age­ment at Al Rayan In­vest­ment in Doha.

“But per­cep­tions of reg­u­la­tors and gov­ern­ments are key hur­dles for the im­ple­men­ta­tion.”

Bourse chief ex­ec­u­tive of­fi­cer Khalid Ab­dul­lah al Hus­san told Bloomberg tele­vi­sion on Tues­day that the change al­low­ing the trad­ing strat­egy had just hap­pened, “so it will take time for de­mand to grow in the mar­ket.” Bloomberg

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