JEDDAH, 26 March 2006 — The turnout of foreign residents at banks to open investment portfolios for Saudi stocks was very low yesterday, the first day that the government opened the market to them.
The news of expatriates’ entry into the market failed to halt the downtrend of the market. The Tadawul All-Share Index (TASI) dropped 626.65 points or 3.94 percent to close at 15,268.46. Over SR5.68 billion worth of shares changed hands yesterday. Only seven stocks were in positive territory while all other stocks were in the red.
Bankers contacted by Arab News remained tight-lipped on the market response, as share prices dropped in the range of 2.23 percent for the banking sector to 4.99 percent for the telecom sector.
Adnan Jaber, a Jordanian journalist, said he had approached his bank with high expectations of investing in the market but is now hesitant. “The banks are not yet ready with the application forms, and nobody is giving out information on how one should go about,” he said.
Bankers, however, said expatriates at this stage would be making only inquiries about investment procedures without conducting any transactions.
Custodian of the Two Holy Mosques King Abdullah took the decision last week allowing foreign residents to invest directly in the market as part of efforts to increase its liquidity.
The move is expected to pump at least SR10 billion to the bourse, the largest in the Arab world. According to financial analysts, a large number of the country’s six million expatriates are expected to join the market within the next three months.
A tour of banks in Riyadh and Jeddah showed that only a few expatriates turned up yesterday to open investment portfolios for stocks.
“No foreign residents exchanged stocks today as they had to complete the procedures set by the Capital Market Authority before start trading,” one source told Arab News.
Asked for his comment, Brad Bourland, chief economist of the Samba Financial Group, and Saifuddin Thassim, a senior banking executive, told Arab News that it would take some time before the impact is felt.
As Thassim explained, the application form filled in by an expatriate will have to be vetted by the banks to ensure that he has fulfilled all the requirements.
One of the major concerns of the expatriates relates to the iqama requirement. “What happens if the iqama is not renewed? Will the holder have to sell his shares at the prevailing market rate?” asked Mustafa Hashim, an experienced share trader from India, who suggested that there should be at least a three-month grace period to let him recover from the loss he is incurring at the time of liquidating his stocks.
An Egyptian expatriate said a major inhibiting factor is the freezing of one’s account in the event of the expiration of the iqama. “When I used my ATM card to withdraw money from my bank account for an emergency back home, the transaction was refused. Only then did I realize that my iqama had expired. It took me four days to renew my iqama putting my family in Cairo at great inconvenience.”
“People wanted to know all the details and about the documents required to open a share portfolio,” said a bank employee.
Banque Saudi Fransi yesterday sent messages to its non-Saudi customers, inviting them to open portfolio accounts to trade in stocks.
A number of foreigners suggested caution. Michel Abdo, a Lebanese, said he was interested in investing in stocks “but due to the current market fall I have fears and would rather wait until the market is back on track,” he said. A Jeddah resident from South Asia said, it was a good time to invest, but he would prefer to wait for a week or two for the dust to settle down.
— With inputs from Khalil Hanware, Javid Hassan, Samir Al-Saadi and P.K. Abdul Ghafour
