Saudi stock market changes 'gradual'

Saudi Arabia's long-awaited opening of its stock market to foreigners will be "gradual", the country's capital market regulator said on Tuesday. "It is still within our strategy, but it should be done in an orderly and gradual manner to make sure it does not impact the market's stability," Abdulrahman al-Tuwaijri, chairman of the Capital Market Authority (CMA), said at a meeting with executives from listed companies that was attended by reporters. "This gradual manner will happen, but we need time to make it happen in a safe and orderly manner. We also need to make sure it will not have any negative impact on the market." The plan to widen foreign access to Saudi shares via limited direct ownership has helped to boost the stock market in the last several months. Analysts have predicted the market, the largest in the Arab world, could open this year, but the CMA has not given a date and Tuwaijri did not say anything concrete about timing on Tuesday. "Some people worry that if you further increase the inflow of capital right now when the markets are finally booming you will end up with another bubble. You want to do it in a way that's beneficial for the market and you don't want a correction very soon after you've taken that step," said Jarmo Kotilaine, chief economist at National Commercial Bank in Jeddah. The TASI all-share index has risen by 23.6 percent since the start of the year after the world's top oil exporter recorded 2012 economic growth of 6.8 percent on the back of strong energy markets and lavish government spending. The market suffered two sharp corrections in 2006, losing more than half its value. Other analysts have pointed to higher Middle East political risk and regulatory changes in sharing oversight between the CMA and central bank as reasons any further market opening might be delayed. Foreigners can already buy Saudi shares through swap deals made by international investment banks, and via a small number of exchange-traded funds (ETFs). "It's a very important thing for the Saudi economy. At the moment there is more speculation than investment in the market. When the foreigners come they will put more pressure on the companies and other investors to invest in the correct way," said Hesham Abo-Jamee, chief executive of Bakheet Investment Group in Riyadh. The CMA is considering allowing qualified foreign investors to take a capped share in each Saudi company, with international buyers able to own a total of around 20 percent of the market's value, according to proposals circulated to the financial industry last year. "Foreign investors already exist in the market through swap agreements...also ETFs are available for foreign investors," Tuwaijri noted at the meeting in the offices of the Saudi Chambers of Commerce. "The percentage of foreign investors is still low at 3-4 percent," he added.