Tadawul seeks to boost foreign ownership to 25% in 2 years

The Saudi Stock Exchange (Tadawul) seeks to increase foreign ownership of Saudi equities to 25 percent over the next two years, from the current 4 percent, Bloomberg reported, citing CEO Khalid Al Hussan.

“It will be great if one day our 49 percent foreign- investor limit is challenged but ideally, we will be satisfied if in the next two years or more, we have about 20 to 25 percent foreign ownership in our markets,” Al Hussan said.

The Saudi bourse currently has about 120 registered Qualified Foreign Investors (QFIs), who are allowed to trade Saudi stocks directly.

It is reviewing applications of 180 more, Al Hussan said.

Saudi Arabia, the world’s biggest oil exporter, is undertaking a series of reforms as it seeks to diversify its economy and boost its non-oil sector.

As part of the reform plan, the Kingdom is eyeing inclusion in MSCI’s emerging market index, a decision on which is due in June. The bourse also seeks to be included on FTSE Russell’s list of emerging market countries.

“Index inclusion for us isn’t a question of if but of when. We are confident that we have taken all the necessary remedial measures which has been pointed out to us by the providers,” Al Hussan said.

The Saudi stock market will account for 2.3 percent weight of the MSCI’s Emerging Market Index, if included as expected by late 2018, the index provider said last month.

This estimated weighting would make the Saudi securities market the third largest among EMEA counterparts, behind South Africa (6.7 percent) and Russia (3.4 percent).

Accordingly, an index inclusion could result in inflows of about $30 billion to $40 billion, Al Hussan said.

Commenting on the upcoming initial public offering (IPO) of Saudi Aramco, he said the Saudi exchange is prepared to host the listing and does not see any significant liquidity concerns arising from it, given a long track record of successful IPOs.

“The question of timing and other matters with the Aramco listing lies with the issuer but from our side, we are prepared for it,” he said.

Asked about the impact of the Kingdom’s anti-corruption crackdown late last year, the CEO said it boosted investor confidence in the economy, with QFI applications increaseing significantly in the two weeks after the probe.