Saudi aligns weekend in a step toward opening market


Non-resident foreign investors can currently only participate through share-swap transactions and exchange-traded funds. Photo – AFP file picture

Riyadh: Saudi Arabia will shift its weekend to Friday and Saturday starting next week, taking the biggest Arab economy a step closer to opening its $400 billion stock market to foreign investors.

Government ministries and monetary agencies will adopt the new weekend from June 29, aligning Saudi Arabia with the other five Gulf Cooperation Council (GCC) countries, according to a royal decree on Sunday. The decision was taken based on "the economic position of the kingdom and its international and regional obligations," it said. The Saudi weekend has been Thursday and Friday. "Investors can read between the lines and see this as another step towards opening up the market," Fadi Al Said, senior fund manager at ING Investment Management in Dubai said by phone on Sunday. "It's not official, but this is one of the things Saudi needed to do to open the markets for foreign investors."

Deutsche Bank and HSBC Holdings are among banks that have predicted the kingdom's stock exchange, the largest in the region with a market value bigger than those in Turkey and Ireland combined, may open to foreigners as early as next year amid rising demand for assets. Such a move may attract as much as $30 billion of inflows, John Burbank, founder of $3.7 billion San Francisco-based hedge fund Passport Capital, said in February.

Morgan Stanley
Non-resident foreign investors can currently only participate through share-swap transactions and exchange-traded funds.

The Tadawul All-Share Index declined 0.7 per cent at 1:06pm in Riyadh, trimming the advance for the year to 10 per cent. That compares with a surge of 39 per cent for Dubai's benchmark index and 5.5 per cent for the MSCI World Index. Morgan Stanley and Credit Suisse Group are among global banks shifting regional equities bases to Riyadh in anticipation the market will open up. MSCI, whose gauges are tracked by investors managing about $7 trillion, last year resumed Saudi coverage and said it would consider including the nation in frontier or emerging-market indexes if it allows foreigners direct access.

MSCI this month upgraded the United Arab Emirates, the second-biggest Arab economy, and Qatar to emerging-market status. The index provider's decision "puts additional pressure on Saudi Arabia to accelerate its qualified investor program and we now believe this is likely over summer," Emad Mostaque, a London-based strategist at Noah Capital Markets EMEA, said June 12.

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"Opening up to foreigners is mostly about regulation," Tariq Qaqish, head of asset management at Dubai-based Al Mal Capital, said by phone on Sunday, adding that changing regulation in the country can take years. Still, the weekend shift "is definitely a step forward," he said. The changes to the working week will "lead to greater convergence with global markets," Saudi Capital Market Chairman Mohammad Al-Sheikh said.

The kingdom has taken other steps in recent months. Al Sheikh, a World Bank executive representing Saudi Arabia, was appointed as chairman of the CMA in February. In April the CMA announced a plan to issue credit ratings for local companies, and in May issued a resolution to adopt a stock price fluctuation limit of 10 per cent for shares on their first trading day. The same month it proposed new procedures for companies with losses at or exceeding 50 per cent of their capital.

Saudi's weekend switch will "put an end to negative effects and lost economic opportunities" from having different working days than regional and international institutions, the Saudi Press Agency said, citing the royal decree.

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