Abha, Saudi Arabia, Asharq Al-Awsat- – with the announcement that Saudi Arabia will allow foreign residents to buy shares directly from the local exchange for the first time, Experts have told Asharq al Awsat that expatriates would invest more than $ 2.6 billion. The decision would also reduce the amount of remittances foreign transferred out of the Kingdom, believed to be $17.3 billion.
Over six million non-Saudis who live in the Kingdom will be able to invest in the stock market as of Saturday, the Capital Market Authority said. King Abdullah approved the measure.
The measure is aimed at boosting demand in a market that has witnessed a sharp decline in the last month.
“This is a positive move,” said Rashed al Fawzan, an economic expert, which will inject more money in the local stock market and reduce the amount of funds transferred by resident abroad. Investors should focus on the long-term effects of the decision, he added.
Fawzan said that much remained to be done to bring the Saudi bourse level with world stock markets and that new laws were being adopted at a slow pace.
“Early predictions indicate that foreign residents in Saudi Arabia will inject 10million Riyals into the stock market.” The economic expert predicted that expatriates would invest in well-known successful companies, especially as share prices were relatively low now.
For his part, Ali al Jaafari said, “This decision gives the Saudi stock market an additional dimension, especially given the large amounts of funds transferred outside the Kingdom but many foreigners.” He called on the authorities to give expatriates additional ownership rights in other fields as this would increase their feelings of belonging.
Other economic experts held different views and argued that the decision would have a limited effect on the Saudi stock market.
Aziz Barakat told Asharq al Awsat the amount of money that will be invested in the bourse will be low because foreign residents have a limited income, as 20% of expatriates are Indians who hold low-paid jobs and are unable to invest.
Barakat indicated that the actions of a few Saudi businessmen to increase liquidity in the market would not suffice to return the Tadawul index to its previous level. He called on relevant government authorities to give the stock market the freedom it needs to return to its previous levels.