x Abu Dhabi, UAETuesday 25 July 2017

After weekend switch, is foreign access to stock markets next?

Saudi weekend: Saudi Arabia's move to switch its weekend to Fridays and Saturdays has fuelled speculation over the long-anticipated opening of its US$400 billion equity market to foreign investors.

Saudi Arabia has moved a step closer to opening its $400 billion market to foreigners with the decision to move to a Friday-Saturday weekend.

Rami Sidani, the head of Schroder's Middle East and North Africa desk, said it represented the next step.

"There is more talk that the regulators in Saudi will allow foreign direct access to the market, however with some limitations on foreign ownership limits on the level of the stock exchange and its companies," he said.

Saudi Arabia's stock market, the region's most liquid with more than $1.3bn traded daily, has been considering opening up to foreign investors for several years.

Currently foreigners have limited opportunities to invest through equity swaps and exchange-traded funds. About 90 per cent of current market activity is dominated by retail investors.

"If the market opens, we won't be using swaps, which is more expensive," said Fadi Al Said, the head of investments at ING Investment Management in Dubai.

"It will mean cheaper commissions, plus counterparty risk is eliminated because you are buying on your name."

The weekend law change is expected to translate to an increase in volumes and trading activity in, Mr Al Said said.

"The window of opportunity for foreigners to trade will be bigger. Right now, you have three days in which Saudi Arabia is disconnected from the world. Participation is lower on Saturday and Sunday because nobody trades."

Saudi Arabia's bourse has a market capitalisation of more than $383bn, with more than 150 companies listed.

"The Arab world is one big market," said Fathi Ben Grira, the chief executive at Mena Corp, a stock brokerage based in Abu Dhabi.

"The trading of the Tadawul represents 80 per cent of the GCC volumes, so to have it trading on the same day as the rest of the neighbouring market is one big plus."

 

halsayegh@thenational.ae