[2007-09-27]  Saudi Arabia lets neighbors into its stock market
Saudi Arabia is allowing citizens of neighboring Gulf countries, including Kuwait and Qatar, to buy and sell shares freely for the first time, moving closer to opening its stock market, the biggest in the Middle East, to all foreign investors.

Nationals from the five other Gulf Cooperation Council states may now buy Saudi stocks in any industry and without limit, the kingdom's Capital Markets Authority said late Monday. That pronouncement removes a statute restricting ownership of banking and insurance stocks to Saudi citizens and foreigners living in the kingdom.

Saudi Arabia has been taking "gradual but steady steps toward opening the market," said Shadi Zubeidi, head of investment banking advisory at Saudi-Swiss Securities in Riyadh. "We'd like to see the bourse opened to all foreign investors. It's good to see the regulators moving in that direction."

The Saudi government cleared the way in March 2006 for foreigners living in the kingdom to trade stocks and allowed listed companies to split their shares to make them more attractive, in an effort to revive the flagging Saudi equity market.

In May 2006 it fired the chief regulator, Jammaz al-Suhaimi, in an effort to restore investor confidence.

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The benchmark Tadawul All Share index gained 48.47 points to 7,910 in Riyadh on Tuesday. Al-Rajhi Bank, one of the biggest publicly traded lenders in Saudi Arabia, and Samba Financial led the advance.

Saudis are "buying in anticipation that other Gulf investors will start pouring in, especially given the expectations of strong third-quarter results on the horizon," Abdulla al-Aqil, a trader with Samba Financial, said Tuesday.

The Tadawul has dropped 0.4 percent so far this year, the only market to fall in the Gulf Cooperation Council countries. Last year, it tumbled 53 percent, the worst-performing benchmark in the world, fueled by concern that a two-year bull market had left the shares expensive relative to expectations for earnings growth.

At stake for foreign investors in Saudi Arabia is a market with a value of $357 billion, about the same as the stock market of Finland.

The International Monetary Fund forecasts that the Saudi economy will expand 6.5 percent this year. The price of crude oil has gained more than 50 percent in 2007, and closed at a record $83.32 Thursday. Gulf oil producers, including Saudi Arabia, are earning $1.2 billion a day from oil exports.

The regulator's decision "is definitely a good first step," said Khaled Masri, a partner at Rasmala Investment in Amman. "It will lead to more portfolio investment going into Saudi Arabia. The next step may be opening the market to foreign investors."

Investors from Latin America to Japan are seeking to buy Gulf stocks to tap economic growth fueled by petrodollars in the region, Guillaume Hannebelle, head of Middle East equities distribution at Citigroup, said in a June interview. Two years ago international interest in the stocks was "virtually zero," because few were open to foreign buyers and information disclosure was limited, Hannebelle said.

Qatar, the smallest oil producer in the Organization of Petroleum Exporting Countries, opened its stock exchange to international investors in April 2006, allowing them to buy as much as 25 percent of a company's shares. Regulations in the United Arab Emirates now allow companies in Abu Dhabi and Dubai to let international investors buy combined stakes of as much as 49 percent.

"Gulf investors will probably start buying next week as this news filters through and after they have a chance to talk to brokers and move money over," said Waleed Madani, vice president of research at the investment bank Financial Transaction House in Jidda.


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