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Saudi stock market could join leading emerging markets index by April 2017: sources | ASHARQ AL-AWSAT English Archive 2005 -2017
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File photo of traders at the Saudi Stock Exchange (Tadawul) in Riyadh. (Reuters)

File photo of traders at the Saudi Stock Exchange (Tadawul) in Riyadh. (Reuters)

File photo of traders at the Saudi Stock Exchange (Tadawul) in Riyadh. (Reuters)

Jeddah, Asharq Al-Awsat—Saudi Arabia’s stock market, the Tadawul, could be placed on a world-leading index of emerging markets two years after it opens to global investors in April this year, sources have told Asharq Al-Awsat.

Financial analyst Abdulaziz Al-Fahad said the choice of April was a “very suitable” one, as it came at the beginning of the second quarter of the year before several national holidays expected in the third quarter, and could see the bourse join MSCI’s Emerging Markets index exactly two years later, in April 2017.

Saudi Arabia’s Capital Markets Authority (CMA), which regulates all capital markets activities in the Kingdom, announced in July it would be opening the Tadawul to foreign investors by mid-2015.

With a 530 billion US dollar market cap, the bourse is the Arab world’s largest, but is not included on MSCI indices—unlike other regional exchanges such as the Dubai Financial Market, the Abu Dhabi Securities Exchange, and the Egyptian Exchange—because it does not allow currently direct ownership of shares in its listed companies by foreign institutions or individuals.

The MSCI index, created by Morgan Stanley Capital International, and regarded as a benchmark by emerging market-focused fund managers, only lists bourses from emerging markets around the world open to direct foreign investment.

Though the Tadawul is fully open to investors from the six-member Gulf Cooperation Council, other foreign investors are currently only able to own shares traded on the bourse indirectly via swaps and exchange-traded funds (ETFs).

Essam Khalifa, a member of the Saudi Economic Association, told Asharq Al-Awsat that opening up the exchange to foreign investment would help improve the global financial standing of the Gulf region as a whole.

The size, liquidity and diversity of companies listed on the Tadawul should be attractive to foreign investors looking to capitalize on its rapid growth in recent years, according to analysts.

Since regulation of the market was tightened with the creation of the Capital Markets Authority in 2003, the exchange has grown rapidly. In the past two years alone, it has seen a 55 percent rise in its market cap.