Saudi Arabia to consider secondary listings on exchange

Markets Update: Saudi Arabia's market regulator will allow public companies from foreign markets to seek a secondary listing on the Tadawul, the Gulf region's biggest bourse.

A trader monitors stocks at the Saudi Investment Bank in Riyadh. Reuters / Fahad Shadeed
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Saudi Arabia's market regulator will allow public companies from foreign markets to seek a secondary listing on the Tadawul, the Gulf region's biggest bourse.

The country's Capital Markets Authority introduced the regulations yesterday, a major step towards foreign ownership of Saudi listed companies. "A foreign issuer whose securities are listed in another regulated exchange may apply for its securities to be registered and admitted to listing," the regulator said in a statement on its website.

"The Authority may admit the securities to listing provided that, in the Authority's opinion, the listing rules applicable in the foreign issuer's jurisdiction of listing are at least equivalent to these rules."

Saudi Arabia's stock market, the most liquid in the region with more than US$1.3 billion (Dh353.9 million) traded daily, has been considering a wider opening of its market for several years.

Currently, foreigners have very limited opportunity to invest through indirect ownership and exchange-traded funds that track indexes.

HSBC last month said the country would be a candidate for "frontier status" designation by the index-compiler MSCI if the market opened up to foreign investors.

The inclusion into the MSCI index would bring the kingdom closer to "emerging markets" status. All other GCC markets are considered "frontier markets".

A number of investment banks are said to be in talks with the Saudi regulator to advise on the opening up of the market by the end of the first quarter of this year.

"We remain optimistic on a Q1 opening," said one investment banker close to the talks.

Saudi Arabia "has taken a lot of strides towards opening this thing up", said the banker, who wished to remain anonymous, but said it would not come as a surprise if an opening up of the market was delayed further.

Fund managers said they were optimistic about the prospects of the Tadawul becoming more accessible to a larger pool of investors.

"It seems this is what they want to happen, but in a very controlled fashion, which is positive," said Saleem Khokhar, the head of equities at the National Bank of Abu Dhabi.

Foreign companies already operating in Saudi Arabia would be ideal candidates to list on the exchange because retail investors, which make up a majority of overall trading, would already be familiar with their stories, Mr Khokhar said.

Saudi Arabia's bourse has a market-capitalisation of $338.4bn with more than 150 companies listed.

"It is difficult to ignore the fact that Saudi's stock exchange is a dominant market in any metric you look at," said Tarek Lotfy, the head of capital markets at Arqaam Capital in Dubai.