Saudi Arabia Seeks to Lure Institutional Money to Bourse

Saudi Arabia, home to the biggest Arab bourse, seeks to boost institutional investments in its $387 billion stock market as the top OPEC producer weighs plans to allow foreigners to buy shares directly.

While foreign investments are welcome, they’re not crucial to liquidity, Mohammad Al-Sheikh, chairman of Capital Market Authority, said at the Euromoney conference in Riyadh today. The market is now dominated by individual investors, he said.

“The Saudi financial market doesn’t need any liquidity, but the market might need professional foreign investors that will add a lot of value to the financial market with their knowledge and experience,” he said. “Therefore if we do open the Saudi market to foreign investors, it will only be done after intensive study and gradually.”

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

Saudi Arabia only allows non-resident foreigners outside of the six-nation Gulf Cooperation Council to invest through equity swaps and exchange-traded funds. The benchmark Tadawul All Share Index has gained 5.6 percent this year.

Investors are seeking access to Saudi Arabia as the government pursues a spending plan of more than $500 billion in an effort to boost the non-oil economy. 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 direct access to foreigners.

Al-Sheikh, a World Bank executive representing Saudi Arabia, replaced Abdulrahman A Al Tuwairji at the helm of the kingdom’s regulator in February.

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