17 Jan 2012

By Naveed Ashraf:  It has been rumoured for a long time but reports are emerging that the Saudi authorities will shortly announce that foreign investors will be able to buy stocks listed on the Saudi Arabia’s Tadawul All Share Index. This is a positive development for Apex’s clients.

At the moment foreign investors can only have access to stocks indirectly (swaps) and through exchange traded funds that track indices in the Middle East’s largest economy. Despite rising oil prices, the Tadawul lost 3.1% in 2011, largely due to fears about the European Sovereign Debt Crisis, slowdown of the US economy and the uncertainty of events from the ‘Arab Spring’.

The Tadawul still fared better than its other GCC neighbours and world markets (Bahrain -20%, Abu Dhabi -12%, DAX -17%, Nikkei -17%). The government has increased spending and announced large projects in the Kingdom, which in turn should flow through to the economy. However with the world economy being in such a fragile state, these benefits have not yet been felt. The Tadawul has been no exception to these stresses. 

Skepticism remains however with the wider public and experts in the financial industry as to the timeframe of these changes  enabling foreign investors into the markets..  Nonetheless the fact that Tadawul officials are looking into ways to allow access to the market is very positive. They are trying to take precautions so that the speculative money doesn’t cause volatility and increase correlation to the world markets.  In addition restrictions on majority shareholding will remain.