RIYADH: Credit Suisse has said the news of Capital Market Authority (CMA) approving equity agreements between non-resident foreign investors and authorized persons in Saudi Arabia is likely a catalyst in terms of capital inflow.
Foreigners were not allowed to own financial stocks in Saudi Arabia until last year, and the move is a clear sign of greater liberalization in the country, the brokerage said. “The move will give investors exposure to the economic benefits of stocks listed on the Tadawul Stock Exchange, while the ‘Authorized Persons’ maintain legal ownership of the shares,” the brokerage added.
Credit Suisse covers 13 companies in Saudi Arabia, which is about two-thirds of the total market capitalization of the Tadawul Stock Exchange.
The Saudi Tadawul index has lost 24 percent of its value year to date, the financials sector in particular. The brokerage said it expects this trend to reverse in 2009, estimating 26 percent earnings per share growth in the banking sector. The brokerage reiterated its “outperform” rating on Al-Rajhi Bank, Saudi Arabian Fertilizers Co and fresh dairy producer Almarai.
The CMA said on Wednesday it has decided to allow foreign investors to buy shares through certain licensed Saudi investors, who would be the legal owners of the shares. It did not however say when this decision would be implemented and did not publish regulations that will bind its implementation.
CMA’s chief Abdulrahman Al-Tuwaijri said the measure has taken immediate effect, Al-Eqtisadiah newspaper reported. “It will be the foreign investor’s right to determine the selling or the buying decision through the contract with the intermediary,” he added.
Under the measure, potential foreign investors would be entitled to returns related to their share purchases and must take on all of the economic exposure, the CMA said in a statement on the bourse website.
The announcement comes less than a week after the exchange began naming investors with stakes of 5 percent or more to boost transparency.
