Riyadh: Saudi Arabia, the world's largest oil exporter, may soon allow overseas money managers to invest directly into shares of local companies, according to Deutsche Bank AG, Europe's biggest bank by assets.
"I am convinced that the market will open up to foreign investors and part of me is very optimistic it's going to be soon," Jamal Al Kishi, chief executive officer of Deutsche Securities Saudi Arabia, said in an interview in his Riyadh office on February 11. "I think the leadership sees the benefits of doing so, but they just want to make sure that every facet is examined and thoroughly understood before plunging into this." International investors are seeking access to the Arab world's largest bourse as the government pursues a spending plan of more than $500 billion. The kingdom, which last year said it will open the gauge gradually, only allows non-resident foreigners outside of the six-nation Gulf Cooperation Council to invest through equity swaps and exchange-traded funds.
A relaxation of restrictions on foreign investment in the $387 billion stock market may reduce the influence of retail investors, Al Kishi said. International investors find Saudi petrochemicals, banking and telecommunication stocks attractive, he said.
Saudi Arabia is the top emerging market and direct foreign investment could attract as much as $30 billion in inflows, John Burbank, founder of $3.7 billion San Francisco-based hedge fund Passport Capital LLC, said on February 7. Morgan Stanley and Credit Suisse Group AG are shifting their regional equities bases to Riyadh from Dubai, while VTB Capital Plc, the investment banking unit of Russia's second-largest lender, said last month it may set up an equities business in the Saudi capital.
"I don't expect a massive avalanche of volume once the market opens up," Al Kishi said. "Volumes will increase gradually. I think moderating the huge influence of retail investors by bringing in institutional fundamental investors into the market will be highly beneficial."
Deutsche Securities is one of 30 brokerages in the kingdom, according to Saudi bourse data. It competes with banks including Morgan Stanley, Credit Suisse and HSBC Holdings Plc, the data show.