Saudi Arabia is targeting ways to boost foreign investment in its bourse, almost two years after easing access to the one of the world’s most restricted exchanges.
The Tadawul, as the market is known, will hold talks with companies already trading on other Gulf Cooperation Council exchanges for a cross-listing in the kingdom by 2018, Chief Executive Officer Khalid Al Hussan said in an interview in Riyadh on Sunday. The country is also counting on rules that will extend the settlement cycle on stock trades to attract more foreign investors, according to the vice-chairman of the country’s Capital Market Authority.
Saudi Arabia allowed foreign investors to trade stocks directly in 2015, prompting analysts such as John Burbank, founder of San Francisco-based hedge fund Passport Capital LLC, to predict that billions of dollars of investment from overseas would flow into the market. Total foreign ownership of Saudi stocks is about 4 percent.
The kingdom only has Saudi Arabian companies listed on its bourse. Aluminium Bahrain, which is listed in Manama, halted plans to be the first non-Saudi company to list on the Tadawul in 2015, Chief Executive Officer Tim Murray said at the time. The Tadawul also wants private companies in the GCC to sell shares on its alternative market, Nomu, with the first expected this year, Al Hussan said.
The Tadawul is also on track for its own initial public offering next year, Al Hussan said. The exchange hired HSBC Holdings Plc’s Saudi unit as a financial adviser for the sale in May.
The Tadawul has about 50 qualified foreign investors and expects to draw more after shifting to a T+2 cycle by the end of June, a system used across most major exchanges, Capital Market Authority Vice Chairman Mohammed El-Kuwaiz said in an interview. The current system requires same-day settlement.
The country is also aiming for inclusion in MSCI Inc.’s emerging-market index to boost foreign ownership.
“T+2 is the last missing piece of the puzzle for MSCI to move forward on” possibly including Saudi Arabia on its emerging-market watchlist, Wafic Nsouli, the managing director and head of equities at Dubai-based investment bank Arqaam Capital Ltd., said by e-mail on Sunday. This is “a game changer for the country and the wider region and one we expect as soon as this May,” he said.
The Gulf’s biggest stock exchange is seeking to attract more capital from abroad as Saudi Arabia goes through unprecedented economic and social change.
Foreign investment is a cornerstone of Deputy Crown Prince Mohammed bin Salman’s “Saudi Vision 2030,” a blueprint for the post-oil period that includes plans to sell shares in state oil giant Saudi Arabian Oil Co. and expand its sovereign wealth fund into the world’s largest.