The Saudi Arabian Stock Exchange: Opening to Foreign Investors in June

As of June 15th this year, the largest stock market in the Middle East Saudi
Arabias Tadawul will be open to foreign investors for the first time.
The Saudi exchange, which is worth well over $500 billion, is dominated by
energy-related and financial organisations including major banks and
petrochemicals giant Saudi Arabian Basic Industries Corporation (SABIC). After a
roller-coaster ride since July 2014 when the intention to liberalise was announced
(and a barrel of oil traded at $100) the market is up 11 percent this year.
This long anticipated development confirmed on April 15 th by the Saudi
government will go a long way towards positioning the Kingdom as a highly
significant emerging market. Given the size of the Saudi market (similar to that
of South Africa) there is a virtual guarantee of eventual inclusion in the MSCI
Emerging Market Index, moving up from the Frontier Markets Index. Two much
smaller regional players (Qatar and the UAE) were promoted in this way last
year.
This stock market liberalisation programme should also result in the
acknowledgement of Saudi Arabia as a key G-20 economy. It is widely thought
that the opening up of the exchange would be the final piece in the economic
jigsaw.
The Saudi stock market is relatively more representative of the real economy
than many others in the region. The country is also very active in the IPO
markets and last year the National Commercial Bank raised $8 billion in the
largest share sale in the Arab world.
Worries that a change of government following the death of King Abdullah in
January would result in a reconsideration of the opening up of the market were
thus shown to be unfounded.