Saudi Arabia has doubled down on a longstanding effort to entice foreign companies to list on its stock exchange, via a new batch of rules published at the weekend by the bourse and the country’s markets regulator.
The move is a part of plans to provide diversity to the kingdom’s economy beyond oil by offering a wider range of investments. But some critics questioned its appeal either to investors or to companies seeking to list their shares on the exchange, known as Tadawul Mohammed Elkuwaiz, chairman of the kingdom’s Capital Market Authority, said the move would “create bigger opportunities for diversification of investment for investors” on the Tadawul. The new rules would make it easier for foreign companies to appear on the main market and cheer trading and listing on the secondary market, known as NOMU, the CMA said. Rule changes to acknowledge dual listings by foreign companies were first announced in 2012 but progress has been slow. “They’ve been talking about it; the news is that they are executing it,” said John Sfakianakis, chief economist at the Gulf Research Center. “It’s good that they are making the market friendlier and comfortable for foreign companies. It’s part of the opening up and inviting new entrants in the business landscape. ”Mazen Al-Sudairi, head of research at Riyadh-based broker Al Rajhi Capital, backed the adoption of a revised set of rules. “As an investor on the Saudi exchange I am limited to banking and telecoms, but there is no IT or high tech,” he said. “This will bring more opportunities for Saudi investors and diminish the correlation with oil. He said “the opportunity to list would attract small businesses operating in the countries of the Gulf Cooperation Council (GCC), and perhaps to local subsidiaries of large multinationals.”
Saudi Arabia has had problems in attracting foreign investment to its exchange, even though it was included in overseas indices widely followed by international investors, such as the MSCI Emerging Markets index in June this year. In a note to clients on Monday, Steven Holden, founder of Copley Fund Research — which monitors funds with a combined $1.2tn under management — stated that global EM funds remained acutely underweight in Saudi Arabia.