TUESDAY 16 JUN 2015 2:12 PM

FOREIGN INVESTMENT IN SAUDI ARABIA

Saudi Arabia has, as part of ongoing financial reform, opened up its stock market to foreign investors for the first time.

The Saudi Arabian stock market, the Tadawul, is the largest in the Middle East. With a market value of $560bn it is larger than that of Qatar, Abu Dhabi and Dubai put together. By global standards however, Saudi Arabia’s market capitalisation is still relatively small.

Much of Saudi Arabia’s economy is dominated by state-owned energy and government services sectors, which aren’t reflected in the stock market. Instead, manufacturing and financial services are the best performing sectors.

Saudi Arabia’s largest companies, such as SABIC, Saudi Telecom and NCB, are likely to benefit from foreign investors. The move to open the market, which took place yesterday (15 June), could boost the private sector and reduce the economy’s dependence on oil and gas.

Before now, investors had to buy shares indirectly. They are now able to influence Saudi Arabia’s major companies. However, only institutions that manage $5bn of assets with a five-year investment record will be permitted to invest at this point. In addition, no single investor can own more than 5% of a company and overall foreign ownership of any one company cannot top 49%.

Those who are able to invest will find the region appealing. With a booming industry, particularly in the retail, petrochemical and banking industries, and with a growing middle-class, the non-oil sectors are predicted to continue to demonstrate a strong growth rate over the coming years. 

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