Saudi Arabia Opens Up $585B Stock Market To Direct Foreign Investment

“Saudi Arabia’s stock market, valued at $585 billion, opened up to direct foreign investment for the first time Monday, as the kingdom seeks an economic boost amid low global oil prices,” The Street reports.

“The opening of the Tadawul Saudi Stock Exchange allows companies, particularly those that are not in the oil business, to raise money straight from foreign investors, with the goal of expanding businesses, diversifying the economy and creating more jobs for the kingdom’s growing population. Before Monday, foreigners only could access the market indirectly, through a local Saudi institution, which was costly and complicated,” the news agency reports.

An influx of foreign money could “help to plug some of the external shortfall and slow the pace at which Saudi Arabia is drawing down its reserves,” says Capital Economics based in London, as Saudi Arabia’s revenue has suffered from a plunge in oil prices over the past year.

According to BBC Saudi Arabia is “the last of the grouping of the world’s largest economies, the G20, to open up its market to foreigners. Until now, they were only able to indirectly buy shares and would only get the economic benefits (…) Industry experts say Monday’s move, that allows foreigners voting rights, could be transformative for the region as Saudi companies will be able to profit from the scrutiny and strategy of sophisticated international partners and overseas investment will help push forward the country’s economic reforms.“

The market’s value is over $560 billion.  The daily trading volumes reach about $2.4 billion which puts Saudi Arabia ahead of stock exchanges in South Africa, Russia, Turkey and Mexico.

“Investors will also appreciate Saudi Arabia’s strong economy. Over the past few years, high oil profits have been used to wipe out the country’s debt and build its foreign reserves to 100% of GDP,” BBC reports.

Also Saudi Arabia aims to be part of MSCI Inc.’s Emerging Markets index in 2017, according to the CEO of the stock exchange. “Joining MSCI’s Emerging Markets index in 2017 is ultimately our target,” Adel Al-Ghamdi told Francine Lacqua on “The Pulse” according to Bloomberg.

EMerging Equity discussed the Saudi market reclassification in details last month on May 8.

Overall, the kingdom’s market opening to international investors is likely to draw in hundreds of millions in cash, which will boost the Saudi economy as it grapples with the lower oil prices, which is its main source of revenue.