Saudi Stock Exchange prepares for April

Screen Shot 2015-01-08 at 6.14.05 PMLong regarded as one of the world’s most centralized oil exporters, the Saudi Stock Exchange is allegedly opening up to foreign investment towards the end of April 2015.

This desire to attract foreign investment comes at a time when Saudi Arabia is seeking to modernize its oil-centric economy, with the country aiming to put $130 billion into non-energy industries, a drastic change when compared to the country’s past economic policies.

The Capital Market Authority, a Saudi Government organization responsible for monitoring and regulating the Saudi Stock Exchange, informed various brokers in London in November, that the long coveted backbone to the Middle Eastern economy would begin the process of becoming publicly tradable.

Though the names of those guaranteeing that the exchange is going public are anonymous, their statements seemingly validate claims from Saudi Arabia made in July of last year in which the country hinted at opening the market within the first half of 2015.

This was followed by the release of draft rules published in August of the same year by Saudi Arabi that stated that under current draft regulations,

Foreign investors must have at least 18.78 billion riyals or approximately $5 billion dollars to invest in the market

The Riyadh-based regulator also has the power to cap foreign ownership of any single stock at 49 per cent

Those who qualify will face a 5 per cent ownership limit in a single stock as well as a 20 per cent ceiling for all those approved, as well as their clients

In addition, qualified foreign investors’ holdings may not exceed 10 per cent of the market’s total value

In addition to modernizing the Saudi Stock Exchange, the MSCI, an American-based investment group, have stated that by opening the market, the Saudi government could gain serious global attention for investment, with potential to make as much as $40 billion from foreign investment by 2017, according to Schroders Plc. in a statement issued in July.

Being the largest stock exchange in the Middle East in regards to equity, the Saudi Stock Exchange has traditionally only allowed investment from within the Gulf Cooperation Council, a panel of six Middle Eastern nations, except through equity swaps and exchange-traded funds.

As Saudi Arabia continues to bring itself into the 21st century in regards to economic development, only time will tell if the country can modernize and attract enough foreign interest to rid themselves of their over-dependence on oil, or inevitably suffer the fate of a perpetually unstable economy.

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