Saudi Arabia will allow foreign investors to trade on its $538 billion Tadawul All Share Index by early 2015.
In a development which is likely to send shockwaves throughout Middle Eastern stock markets, Saudi’s Capital Market Authority will publish rules for foreign financial institutions hoping to trade on the bourse, by next month.
Buoyed by a rise in oil prices, the world’s largest crude producer has experienced growth of an average 6.4 per cent in the last four years, regardless of political and economic turmoil witnessed across the region.
However, since the government has initiated a $130 billion spending plan to revamp non-oil industries, allowing access to foreigners on its financial market, the largest within the Arab world, will be key to these other sectors fulfilling their potential.
The effect this announcement will have on the Dubai Financial Market and other regional bourses remains to be seen. Nonetheless, Gary Dugan, chief investment officer at the National Bank of Abu Dhabi, claimed: “It’s exciting. It gives greater credibility to the region.”
Dugan added, “The big sleeping giant in the region is Saudi Arabia, a well-capitalized and large market that foreigners couldn’t get access to.”
Considering the kingdom’s vast financial stability, and a market capitalisation of over $530 billion, pressure will only increase on the DFM and ADX to limit its volatility and overwhelming vulnerability to the real estate sector.