RIYADH, 1 October — The Shoura Council has begun debating a draft bill on establishing a formal stock exchange to replace the existing interbank bourse.
The consultative council will vote in a coming session, probably next week on whether the draft capital market law is needed for the Kingdom, council secretary-general Hamoud Al-Badr said.
Saudi economists say it is necessary to provide a legal and regulatory framework for all capital-related activity, such as trading in securities and increasing transparency and accountability, as well as attracting 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 allowing the private sector to run the market. 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.
According to the Consulting Center for Investment and Finance (CCIF), an independent think-tank, only 27 percent of stocks on the market are "free for trading." Only 68 firms are listed on the bourse. During the past decade, only 13 new companies were admitted to the market, CCIF said. The Kingdom’s major economic powerhouses, like Saudi Telecom Co., Saudi Arabian Airlines and the National Commercial Bank, with total assets of more than $70 billion, are not yet listed. The government plans to sell 30 percent of Saudi Telecom before the year-end in the largest shares selloff for two decades.
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 Gross Domestic Product (GDP) of $186.2 billion. The Tadawul All-Shares Index (TASI), capitalizing on strong oil prices, has gained more than nine percent since the start of the year.
