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Foreign shares listing rules may boost Gulf markets

By KHALIL HANWARE JEDDAH: The Capital Market Authority's ( CMA ) decision on Monday to allow foreign companies to list securities on the Tadawul exchange provides a great opportunity for global firms to benefit from the huge liquidity and savings available in the Saudi economy, analysts said.

The decision may also help the region's equity markets lure investors and boost trading volumes, they added.

The new plan takes Kingdom a step closer to direct ownership for overseas investors.

The CMA announced Monday that it was amending its listing regulations to allow foreign firms to cross-list on the bourse, Reuters said.

"The competition for funds between Saudi and foreign companies will be positive for the economy as it will energize Saudi companies to compete more effectively," said Khan H. Zahid, vice president and chief economist of Riyad Capital.

But Sami A. Al-Nwaisir, chairman of the board of ALSAMI Holding Group, described the CMA 's announcement as a cosmetic move.

"This will have minor impact but nothing significantly to affect the move of the market or its depth."

He said he believed that the CMA should try to address the market issues that concerns people by bringing back their confidence before approaching other issues.

But Zahid disagreed with Al-Nwaisir's views.

"Allowing foreign companies to raise funds in the Tadawul, will be a great boon to foreign companies. We can expect a number of regional companies to be interested in a Tadawul listing," he said.

"This is a step in the right direction, but an even bigger step is to allow foreigners, especially foreign institutions, to buy shares in the Saudi bourse," Zahid added.

Reacting to the latest developments, Jarmo T. Kotilaine, chief economist at the National Commercial Bank (NCB), commented: "In principle, this is an encouraging step. Tadawul has successfully established itself as a leading regional market."

Kotilaine said double listings in many cases tend to favor larger markets which, over time, could enable Tadawul to evolve into more of a regional hub.

"For many companies, tapping the capital and liquidity that exists in Saudi Arabia will be an attractive opportunity to diversify their funding and to build a broader reputation. The ultimate impact of the measure would doubtless benefit from the much anticipated moves toward greater foreign investor access to Saudi securities," Kotilaine pointed out.

Commenting on the CMA 's move, Paul Gamble, head of research at Jadwa Investment, said: "This gives the opportunity for companies from elsewhere in the GCC to list in the Kingdom. As the Kingdom is by far the region's largest stock market, any GCC company listed on it would have access to a much larger pool of capital than in its home market."

He added: "There have not yet been any indications that foreign companies would list on the Tadawul and until that happens there is not expected to be any impact. A unified stock market would be a useful step toward closer GCC integration, but problems merging the markets in the UAE suggest that this remains a long way away."

© Arab News 2012

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