Saudi Arabia, the world''s largest oil exporter, plans to allow foreigners to invest in its stocks and initial public offerings through domestic funds, the stock market regulator said in an interview aired on Saturday. Most Gulf oil producer states place some restrictions on investors from outside the region buying shares.
Saudi Arabia is the least open, only allowing foreign capital into its market if the investors are based in one of five other Gulf states. "Gradually ... we will allow some funds to be established by licensed firms through which investment from outside the kingdom would be allowed in a transparent fashion," Abdulrahman al-Tuwaijri told Al Arabiya television.
Tuwaijri, who heads the Capital Markets Authority (CMA), did not give a time frame for the move in the portion of the interview broadcast by Arabiya. "We are concerned about hot money which enters and exits quickly," said Tuwaijri, when asked why the CMA had put the largest Arab bourse virtually off-limits to foreign money.
Gulf countries are easing restrictions on foreign investment after a share market rout last year, when four of the region''s seven stock benchmarks lost most than 35 percent of their value. Regulators hope foreign institutional investors will eventually overtake domestic retailers as the main drivers of trading, making their markets less volatile.
"The door is not fully shut. We are keen that the changes at the stock market are made through an organised process ... without causing any jolts," he said. "We are keen on knowing who is trading on our floor." Foreign investors are driving a recovery in the other markets, especially, Oman, Dubai and Abu Dhabi, the region''s three best performers this year.
Having more than doubled in 2005, the Saudi benchmark tumbled 52.53 percent in 2006, becoming the worst performing Arab market. The index is up 24 percent this year. In October, the cabinet ordered the CMA to remove constraints on investors from five other Gulf Arab oil producers in line with a 2002 agreement by the Gulf Co-operation Council.
The Council, a loose political and economic alliance that comprises Saudi Arabia, the United Arab Emirates, Kuwait, Bahrain, Qatar, and Oman, is preparing for monetary union as early as 2010. Some Gulf private sector institutions such as investment banks have been active in the Saudi market for years, sometimes through special investment vehicles. Tuwaijri said the CMA was considering recalculating the main index and some of the sector indexes.