Saudi readies for flurry of foreign investor licences

london — The chief executive of Saudi Arabia’s stock exchange said on Monday he expected a flurry of licences allowing the first foreign investors to buy shares there in coming weeks.

Speaking on the day the exchange opened its doors to direct foreign investment, Adel Al Ghamdi said the first ‘Qualified Investor Licence’ should be awarded straight away and rules for foreign investors should evolve with time.

“We have six applications under process from very large institutions — the first transaction from a qualified foreign investor will actually take place today,” he told Reuters in an interview.

“As we evolve, there might be a spike of involvement from foreign investors over the next two or three months, but that will stabilise as we go forward.”

The Saudi market regulator has said foreign institutions can buy stocks directly from June 15, but it has not so far announced the award of any licences permitting them to do so.

The $556 billion stock exchange is one of the last major bourses world wide to open to foreigners. It is one of the most hotly anticipated reforms in the region for years and carries similarities to recent changes in China’s stock markets.

It features the world’s largest chemicals producer, Saudi Basic Industries Corp, and Saudi Telecom Co, the Gulf ’s biggest telecoms operator.

But regulatory obstacles and uncertainty about the size of fund inflows have deterred foreign firms from piling in. One restriction, criticised by fund managers, limits foreigners to owning a maximum of 10 per cent of the market by value.

The market edged up in early trade on Monday, with no clear sign of new inflows of funds from

Joining MSCI’s emerging markets index in 2017 is ultimately our target

Adel Al Ghamdi,

abroad as trading remained dominated by local retail investors.

Language has been another barrier. Only around 45 per cent of company announcements in the Saudi market are in English as well as Arabic which makes it tricky for some outside investors.

“This is a start of the framework, this is certainly not the end,” Al Ghamdi said.

Emerging market status

Saudi Arabia aims to be part of MSCI’s emerging markets index in 2017, according to the chief executive officer of the stock exchange.

“Joining MSCI’s emerging markets index in 2017 is ultimately our target,” Adel Al Ghamdi said in an interview in London on Monday. “Once foreign investors have had a bit of experience interacting with the framework, they will provide sufficient feedback to MSCI.”

The kingdom’s stock market is opening up as the nation diversifies its $752 billion economy away from oil. Before Monday, investors from outside the sixnation Gulf Cooperation Council bought Saudi shares through equity swaps and exchange-traded funds. The Riyadh-based Capital Market Authority finalised new rules in May.