Saudi Arabia Aligns Weekend in Next Step Toward Opening Market

Saudi Arabia will shift its weekend to Friday and Saturday starting next week, taking the biggest Arab economy a step closer to opening its stock market to foreign investors.

Government ministries and monetary agencies will adopt the new weekend from June 29, aligning Saudi Arabia with the other five Gulf Cooperation Council countries, according to a royal decree yesterday. The decision was taken based on “the economic position of the kingdom and its international and regional obligations,” it said. The Saudi weekend has been Thursday and Friday.

“Investors can read between the lines and see this as another step towards opening up the market,” Fadi Al Said, senior fund manager at ING Investment Management in Dubai said by phone yesterday. “It’s not official, but this is one of the things Saudi needed to do to open the markets for foreign investors.”

Deutsche Bank AG and HSBC Holdings Plc are among banks that have predicted the kingdom’s stock exchange, the largest in the region with a market value of about $400 billion, may open to foreigners as early as next year amid rising demand for assets. Such a move may attract as much as as $30 billion of inflows, John Burbank, founder of $3.7 billion San Francisco-based hedge fund Passport Capital LLC, said in February.

Non-resident foreign investors can currently only participate through share-swap transactions and exchange-traded funds.

The Tadawul All-Share Index (SASEIDX) gained 0.5 percent yesterday, bringing the advance for the year to 11 percent. That compares with a surge of 42 percent for Dubai’s benchmark index and 6.2 percent for the MSCI World Index.

Morgan Stanley

Morgan Stanley and Credit Suisse Group AG are among global banks shifting regional equities bases to Riyadh in anticipation the market will open up. MSCI Inc., whose gauges are tracked by investors managing about $7 trillion, last year resumed Saudi coverage and said it would consider including the nation in frontier or emerging-market indexes if it allows foreigners direct access.

MSCI this month upgraded the United Arab Emirates, the second-biggest Arab economy, and Qatar to emerging-market status. The index provider’s decision “puts additional pressure on Saudi Arabia to accelerate its qualified investor program and we now believe this is likely over summer,” Emad Mostaque, a London-based strategist at Noah Capital Markets EMEA Ltd., said June 12.

“Opening up to foreigners is mostly about regulation,” Tariq Qaqish, head of asset management at Dubai-based Al Mal Capital PSC, said by phone yesterday, adding that changing regulation in the country can take years. Still, the weekend shift “is definitely a step forward,” he said.

CMA Moves

The kingdom has taken other steps in recent months. In February Mohammad Al-Sheikh, a World Bank executive representing Saudi Arabia, was appointed as chairman of the Capital Market Authority. In April the CMA announced a plan to issue credit ratings for local companies, and in May issued a resolution to adopt a stock price fluctuation limit of 10 percent for shares on their first trading day. The same month it proposed new procedures for companies with losses at or exceeding 50 percent of their capital.

Saudi’s weekend switch will “put an end to negative effects and lost economic opportunities” from having different working days than regional and international institutions, the Saudi Press Agency said, citing the royal decree. Weekend changes for schools and educational institutions will start in the next academic year.

The decision “will make the Saudi market more aligned with regional markets,” John Sfakianakis, chief investment strategist at MASIC, a Riyadh-based investment company, said by phone yesterday.

To contact the reporter on this story: Samuel Potter in Dubai at spotter33@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.