Cross-listing on the Saudi stock market
The Saudi Stock Exchange (Tadawul) is already the biggest market in the Middle East by market capitalization and trading volumes. But it lags well behind others — notably the UAE stock markets — in the proportion of stock held by foreign investors.
One of the measures to open our capital market and increase international participation is to allow cross-listing, which means allowing companies that trade on the stock exchange of their home country to also be listed and traded on Tadawul.
More companies are getting listed on stock exchange markets outside of their home countries because of the benefits. These advantages include gaining international exposure, access to more potential investors (which means access to more capital), having shares trade in multiple time zones and in multiple currencies (which gives issuing companies more liquidity and a greater ability to raise capital), helping to improve a company’s corporate governance structure, attracting more and better talent, and using it as an advertising strategy to attract foreign investors.
Saudi Arabia is expected to finalize rules to allow cross-listings on Tadawul in the second quarter of this year, which will spur more trading on the region’s biggest stock market.
I believe the move will pilot to the Gulf states, as many companies in Gulf Cooperation Council (GCC) countries have already shown interest in listing their shares on the Saudi market. Tadawul also plans to open the doors for small- and medium-sized enterprises in the GCC to access the parallel market.
The Abu Dhabi Securities Exchange (ADX) earlier this year agreed to be the sole entity responsible for clearing UAE securities traded in Saudi Arabia, as part of efforts to encourage the practice of dual-listing of stocks on regional exchanges.
ADX signed a memorandum of understanding with the Securities Depository Center Company in Saudi Arabia, which is wholly owned by Tadawul.
Such an agreement will strengthen bilateral cooperation in the dual-listing of securities in Saudi and UAE financial markets. It can also help attract capital from a broader range of markets, and increase a publicly traded company’s visibility to a greater number of investors.
I believe that allowing cross-listing will attract foreign investment as the benefits of a dual-listing in the Middle East and a different time zone are greater for reaching out to global investors. Cross-listing will allow local investors to diversify investment opportunities, especially in sectors that may not be available in the local stock market.
Cross-listing will be discussed with the CEO of Tadawul, Khalid Al-Hussan, during a panel I am moderating at a conference taking place this week.
Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.
An earlier version of this article erroneously stated that the Securities Depository Center Company in Saudi Arabia wholly owns Tadawul. In fact, Tadawul owns the Securities Depository Center Company. This has been amended in the above text.