RIYADH, 7 October — The Shoura Council yesterday gave provisional approval to a government draft bill to establish a formal stock exchange to replace the existing interbank bourse.
The 120-member consultative council voted by 76 votes for and 16 against that the draft capital market law is appropriate for the Kingdom, Hamoud Al-Badr, the council’s secretary-general said.
The council still needs to study the 62 articles of the bill and then vote on it in a second reading before referring it back to the government for endorsement to pass into law.
Saudi economists say the bill will provide a legal and regulatory framework for all capital-related activity, such as trading in securities, and increase transparency and accountability as well as attract foreign investment.
The Saudi bourse is the largest capitalized stock exchange in the Arab world, valued at more than $80 billion, and has soared to record highs this year. However, the exchange is controlled by a government agency. Currently, the Saudi Arabian Monetary Agency (SAMA) controls the exchange, which was established in 1985.
The proposed government bill calls for an independent body to oversee the market operations. Despite the Kingdom’s huge economic base, the stock market has so far been limited to a small number of dealers as the overwhelming majority of stocks is concentrated in the hands of the government and business families. Only 68 firms are listed on the bourse. During the past decade, only 13 new companies were admitted to the market.
Although market turnover at the end of 2001 rose a sharp 28.2 percent to $22.3 billion, it still represented less than 12 percent of the Gross Domestic Product (GDP) of $186.2 billion. The Tadawul All-Shares Index (TASI), capitalizing on strong oil prices, has gained some 8.5 percent since the start of the year.
