Changing Saudi prepares to open up
The Saudi Arabian Capital Markets Authority, unveiled its final rules in May, heralding the opening of the country’s stock market to foreign institutional capital in mid June. How will the market change as foreigners come in, and who benefits? And how long will it take before foreign institutions are comfortable enough with the technical side of Saudi trading to move in?
Mark Diab, head of MENA equities for Man Investments Middle East in Dubai, says: 'Whether the market opens or not is irrelevant if the fundamental reasons to be invested in Saudi are not compelling, which we think they are'
Credit where it’s due: Saudi Arabia’s Capital Markets Authority said it would spend several months listening to the market before announcing the final rules for the opening of the country’s stock markets, and listen it did.
Granted, having listened, it then went ahead with more or less exactly the same rules it had started out with. But, after years as the world’s most inaccessible major emerging market, just listening is a sign of progressive openness.
Besides, ever since the draft rules were published to widespread surprise last August, there has been a welcome sense that the CMA knows exactly what it is doing. If foreign investors had been asked to provide a roadmap for their direct involvement in the Saudi market, the CMA’s proposals are pretty similar to what they would probably have come up with themselves: start with the big guys who are strong and long-term enough to want to invest properly in the market, rather than to short or churn it; make sure the names that matter – the big pension funds, the insurers, the sovereign wealth funds – can come in; set caps on foreign ownership that are probably important in domestic politics, but which won’t realistically be hit for years anyway; and then turn to the important minutiae of custody and settlement issues.
Saudi calls these investors QFIs (qualified foreign institutional investors) and has high hopes for the impact they will have on the local market.