Riyadh: Stocks in Saudi Arabia advanced to the highest since January 2008 after the world's top oil producer proposed shareholding caps as it prepares to grant foreign investors access to the bourse. Dubai's gauge also rose.
The Tadawul All Share Index climbed 0.9 per cent to 10,825.67. Banking stocks led the advance, with Alinma Bank jumping 4.1 per cent to the highest level on record. Samba Financial added 1.6 per cent while Al Rajhi Bank, the largest traded Islamic lender globally, rose 0.8 per cent. Dubai's DFM General Index climbed 1.1 per cent.
Saudi Arabia, the Middle East's biggest economy, is removing barriers to one of the world's most restricted stock markets as the kingdom pursues a $130 billion spending plan to boost non-energy industries. The country's bourse may be added to MSCI's emerging-markets gauge by 2017 at the earliest, Sebastien Lieblich, executive director at MSCI Index Research, said in July. That may translate into about $35 billion to $40 billion of inflows, John Burbank, founder of Passport Capital, wrote in an e-mail on August 21.
"The market is definitely reacting positively to the news on Thursday of CMA putting out the draft of foreign ownership laws," Mohammed Al Omran, a financial analyst and president of the Gulf Center for Financial Consultancy in Riyadh, said by telephone yesterday. "The laws don't seem to be too restricting and it will definitely appeal to many foreign investors."
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Investors from outside the six-nation Gulf Cooperation Council (GCC), looking for access to Saudi Arabia's $745 billion economy, aren't currently allowed to buy Saudi-listed shares directly, and instead access the market through equity swaps and exchange-traded funds. The kingdom's Capital Market Authority may cap foreign ownership of a single stock to 49 per cent, it said in plans posted on the Riyadh-based regulator's website on August 21.
Alinma rose to 24.10 riyals. Samba climbed to 48.90 riyals and Al Rajhi rose to 72.75 riyals, poised for it's strongest close since September. Saudi shares have gained 11 per cent since July 22, when the regulator announced plans to open the market to foreigners, bringing the index's advance this year to 27 per cent. That compares to a 8 per cent increase in the MSCI Emerging Markets Index in 2014 and a 24 per cent jump in the MSCI GCC Countries Index. The Tadawul is one of the top 10 best performing gauges in dollar terms this year among more than 90 tracked by Bloomberg globally.