Saudi Arabia, the Arab world’s biggest economy, should open its stock market to foreign investors, billionaire Prince Alwaleed bin Talal said.
“Effective measures to invite foreign investors from any state must be taken to allow them to invest in Saudi Arabia,” he said in an interview with Rotana Khalijiah television late yesterday. “Of course there is a fear that it will lead to so-called hot money, which is to enter the market and exit quickly, but we can set regulations to control that.”
International banks are boosting their presence in Saudi Arabia as investors seek greater access to the Arab world’s largest bourse and the second-fastest growing economy in the Persian Gulf after Qatar. Direct foreign investment in Saudi stocks may attract as much as $30 billion of inflows when it opens, John Burbank, founder of $3.7 billion San Francisco-based hedge fund Passport Capital LLC, said Feb. 7.
Saudi Arabia, which last year said it will open the gauge gradually, only allows non-resident foreigners outside of the six-nation Gulf Cooperation Council to invest through equity swaps and exchange-traded funds. A relaxation of restrictions on foreign investment in the $392 billion stock market may reduce the influence of individual investors, Jamal Alkishi, chief executive officer of Deutsche Securities Saudi Arabia, said in an interview in Riyadh Feb. 11.
Saudi Arabia “needs to rely less” on individual investors, Alwaleed said. In Saudi Arabia, as much as 95 percent of trades are from retail investors, and the remaining 5 percent institutional, which is “the opposite situation of what is happening in America, Europe,” he said.
The Saudi benchmark index fell 10 percent in the past year. That compares with an 8.6 percent gain during the same period for Dubai’s DFM General Index. The Saudi measure rose 0.2 percent yesterday to 7,172.57.
The Saudi economy may expand 4.2 percent this year, according to the median estimate of 15 economists surveyed by Bloomberg.