Saudi investment bank Falcom Financial Services’ exchange-traded fund for Saudi stocks will be listed and start trading next Sunday, March 28, the stock exchange said in a statement on its website.
ETFs usually track an index and can be traded like securities. “Non-resident foreigners will be allowed to trade in this fund’s units,” it said.
Falcom won approval earlier this month to list a Saudi Equity ETF on the bourse at a time when the world’s top oil exporter is trying to attract more foreign money to its bourse, having already allowed indirect foreign share ownership via so-called swap agreements in 2008.
At a later stage, Saudi exchange-traded funds will be allowed to include Islamic bond and commodity instruments in addition to Saudi shares, the bourse said.
The Capital Market Authority, the Saudi bourse regulator, will also allow exchange traded funds that include only Saudi shares to be listed on foreign bourses.
Global banks and fund mangers have set up shop in Riyadh and are exploring ways to tap opportunities on the best performing Gulf bourse last year and so far in 2010.
Yet investments remain small as many outsiders want the right to directly buy and fully own individual shares.
Under the swap agreements foreign investors can buy Saudi shares through licensed Saudi brokerages who technically own the stock but transfer the returns to the foreign investor.
Daniel Broby, Chief Investment Officer at UK fund manager Silk Invest, which owns Saudi stocks, said ETFs had a potential of just $200 million in the medium term. “If Saudi Arabia were to allow full foreign ownership in the medium term we could see $14.9 billion flow into equities, assuming the market was included in mainstream emerging markets indexes,” he said, adding that such a move would be a far greater “game changer” for the exchange than ETFs.
