JEDDAH, 19 March 2006 — Finance Minister Ibrahim Al-Assaf yesterday welcomed the proposal allowing foreign residents to invest directly in the stock market, saying it would not have any negative impact.
“God willing, there will not be any negative aspects. But we have to set out specific regulations to avoid any possible negative effects,” he said, adding that a study on the issue would be presented to higher authorities shortly.
“There will be measures against hot money... We don’t want quick entries and exits of funds to the bourse,” he told reporters after signing credit-guarantee agreements with local banks to support small businesses.
Custodian of the Two Holy Mosques King Abdullah last week asked Al-Assaf to conduct a study on the prospects of opening the Saudi bourse to foreign residents and reducing share values to boost liquidity.
The finance minister said Saudi Arabia’s macroeconomic indicators are positive despite a sharp correction that hit the stock market recently after a three-year rally.
“The Saudi economy is strong in terms of economic growth, financial position and exchange rate of the Saudi riyal,” he said.
Al-Assaf said he expected another budget surplus this fiscal year. In 2005, the Kingdom posted a surplus of SR214 billion.
The minister earlier launched a SR3.7 billion credit facility with the support of local banks to finance small and medium businesses that account for about 70 percent of the Kingdom’s firms. “This aims mainly at creating jobs for Saudis and boosting the role of small and medium firms in the economy,” Al-Assaf said, adding that more than 9,250 companies will benefit from the scheme.
“It also aims at removing financial obstacles faced by small and medium firms because of high risk premium and inability to give guarantees,” he said.
Young Saudis complain of tight bank regulations for financing new enterprises while the country faces a rising unemployment rate and strong demographic growth.
