JEDDAH, 25 March 2006 — The Saudi stock market (Tadawul) will receive an unprecedented boost today when the Kingdom’s foreign residents start trading shares in the bourse directly, pumping billions into the market.
Custodian of the Two Holy Mosques King Abdullah gave the green light for the market’s opening to foreign residents last week as part of efforts to increase its liquidity. Expatriates were hitherto allowed to invest only in mutual funds.
The Capital Market Authority (CMA) has already set out rules and regulations for the entry of expatriates in the market that include a ban on their participation in the initial public offerings (IPOs).
Prominent businessman Abdul Rahman Al-Rashid, chairman of the Council of Saudi Chambers of Commerce and Industry, welcomed the regulations set by the CMA and said the opening of the market would boost the national economy.
He urged authorities to list more companies on the market in order to absorb growing liquidity, especially with the entry of expatriate workers.
“The increase in the number of traders with a dearth of shares will lead to a rise in prices,” he added.
Al-Rashid pointed out that most shares of leading companies listed on the bourse are owned by the state. “Authorities must open the door for large family businesses to sell their shares,” he said. “There should be at least 120 companies on the bourse.”
He commended the decision taken by the Saudi Research & Marketing Group (SRMG) to sell 30 percent of its shares in an IPO. “The SRMG IPO offers a new investment channel that would boost the national economy,” he added.