Saudi Arabia Said to Seek Ministry Responses on Market Open

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Saudi Arabia, home to the biggest Arab stock exchange, is seeking feedback from government ministries on the proposed opening of its bourse to direct foreign investment, three people familiar with the matter said.

The draft rules will go for a wider consultation with banks, market participants, and the public once government ministries have responded, the people said, asking not to be named as the matter is private. Proposals include restricting foreign ownership in listed companies to 10 percent to 30 percent, according to two of the people.

The country’s Capital Market Authority said July 22 it will open the stock market to foreigners in the first half of 2015. This may prompt index provider MSCI Inc. to classify the gauge as an emerging market, luring as much as $40 billion of foreign cash, according to Schroders Plc.

The regulator expects to take measures to limit inflows of so-called hot money, and could loosen restrictions on foreign investment over time, according to two of the people.

A CMA spokesman declined to comment, referring instead to a July 22 statement that said consultation with “concerned and interested parties” would begin in August.

Swap Agreements

Saudi Arabia, the world’s biggest exporter of oil and de facto leader of OPEC, is removing barriers to one of the world’s most-restricted major stock exchanges as the government pursues a $130 billion spending plan to boost non-energy industries. King Abdullah, the 90-year-old monarch, has kept the economy expanding at an average rate of 6.4 percent in the past four years, even as Middle Eastern neighbors from Egypt to Iraq grappled with political turmoil.

The Tadawul, as the exchange is known, has a market capitalization of $583 billion, making it about the same size as the markets of the five other Gulf Cooperation Council members combined. The benchmark Tadawul All Share Index has risen 26 percent so far this year and closed at 10,716.24 points yesterday, the highest since January 2008.

Foreign investors can currently only buy shares on the exchange through swap agreements and exchange traded funds. The Tadawul is one of the top 10 best-performing indexes in dollar terms in 2014 among more than 90 tracked globally by Bloomberg.