Saudi Bourse Looks To Attract Foreign Investors Amid Aramco IPO

While it is getting ready to host the initial public offering of Saudi Aramco in what could be the world’s biggest IPO in history, Saudi Arabia’s stock exchange is looking to lure more foreign investors and raise foreign ownership of equities to 25 percent in two years, from 4 percent currently, chief executive Khalid Al Hussan told Bloomberg in an interview published on Tuesday.

A present, the Saudi stock market, Tadawul, has some 120 registered Qualified Foreign Investors (QFI), and the exchange is currently reviewing 180 more applications for QFI, Al Hussan told Bloomberg.

“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,” said Al Hussan. “We are telling global investors that our markets are open and are consistently encouraging them to invest with us,” the stock market’s chief executive noted.

The charm offensive of the Saudi exchange comes as Tadawul is preparing to host the IPO of Saudi Arabia’s oil giant Aramco, which is slated for the second half of 2018. Although the Saudis have not yet announced the international venue for Aramco’s listing, the domestic stock market listing is one of the certainties in this highly anticipated IPO. Saudi officials claim that Aramco could be worth US$2 trillion, and listing 5 percent of it could fetch US$100 billion if that valuation stands.

The Saudi stock market doesn’t see liquidity concerns from Aramco’s listing, Al Hussan told Bloomberg.

The Saudi bourse also expects to be included in the MSCI Emerging Market Index. In June 2017, the Saudi stock exchange was included in the Emerging Market Index Watch List after it had made a series of market reforms, including enabling foreign participation in Saudi IPOs.

“Potential inclusion in MSCI’s Emerging Market Index signals to international investors that the country’s capital market has attained greater maturity in terms of efficiency, governance and regulatory framework,” Sarah Al Suhaimi, Chairperson of Tadawul, said in June last year.

Saudi Arabia opened its market to international investors in June 2015 through the QFI program.

By Tsvetana Paraskova for Oilprice.com

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