John Burbank must be salivating…
Saudi Arabia‘s Tadawul stock market will be open to foreign investors as of June 15th this year, allowing direct access to the Middle East’s largest economy for the first time ever.
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The Saudis announced plans to allow direct foreign investment in Saudi-listed firms some time in the first half of 2015 back in August when they first made draft rules public. Financial analysts note that opening up the Saudi Tadawul stock market will attract hundreds of millions of dollars of fresh capital into the country as it pushes to diversify its oil-based economy.
On Thursday, April 16th the Saudi Capital Market Authority announced that the final rules for direct foreign investment will be published on May 4 and come into effect on June 1. Foreign investors will be welcome after the two-week statutory waiting period has passed.
More on the Saudi Tadawul
The Saudi Tadawul is one of just a handful of global stock markets that does not allow direct foreign investment, and given it lists some of the biggest firms in the Middle East (including O&G industry titan Sabic).
Foreign investors looking for exposure to the Middle East will can now invest in a stock market that is more representative of the real economy than other regional markets. Keep in mind the specific restrictions for foreign investments will not be spelled out until May 4th.
Saudi Arabia started permitting indirect access to Tadawul market through swaps back in 2008, but it has taken seven years to decide to fully open up the market. The huge drop in oil prices last year raised hopes the Saudis might move ahead, as it seemed like the kingdom could use some extra cash as it spends hundreds of billions of dollars every year to build infrastructure and provide jobs for its citizens
When King Salman ascended the throne after the death of his half-brother King Abdullah in January of this year, and the head of the Saudi CMA was replaced shortly thereafter, some analysts and investors expressed concern that Saudi Arabia would not move forward with plans to open the market. Thursday’s announcement seems to allay those worries.