Saudi bourse opens door to short selling
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