Saudi Stock market opened its doors to foreigners on Monday June 15, according to the decision of the Capital Market Authority in the Kingdom, which was announced by the end of last year and many experts consider it a big step which would have an impact on all the money markets in the region, including Egypt, particularly as it will pave the way for the Saudi market to join indicators of global emerging markets such as Morgan Stanley, which is important evidence which guide investors around the world who seek good investment opportunities in such markets
Kabara Says that The opening of the Saudi market for foreigners will pave the way for its accession to the Morgan Stanley index in 2017, in line with expectations, which means relatively decreasing weight of other region markets on this indicator for Saudi, especially the Saudi market with large number of companies compared to neighboring markets that meet requirements to join the Morgan Stanley index such as the size of liquidity and market capitalization.
Morgan Stanley index includes Egypt, the UAE and Qatar markets in the region, Saudi Arabia is one of the largest of these markets, where market capitalization has value to about 570 billion $, and daily trading is about two billion dollars on average, and also includes about 165 listed companies. The Egyptian market has achieved the best performance according to the Morgan Stanley for Emerging Markets Index in 2014.
Although Kabara believes that opening the Saudi market to foreigners, could lead to the withdrawal of some of the investments from the region's markets to Saudi, but the decision is expected to contribute to increase the appetite of foreign investors in general to the region in the long term, after the expected accession to Morgan Stanley index, «because it will expand available investments and draws attention more to the region's markets, especially for investors who are not realize it. »
Recall that before the global financial crisis in 2008, foreigners were not allowed to invest in the Saudi market only through investment funds, then added to it indirect way to invest through swap operations through an agreement with a local brokerage company to buy shares to be owned by the company and the foreign investor gets its revenue.
Kingdom will not open market door to foreigners completely, but there will be still strict conditions, which Kabara sees that it will reduce the size of the entry of foreigners to the market, such as managed assets of the financial institution that is willing to invest in the Saudi market not be less than 5 billion $ size, and also the size of Foreign investment in one company's stock not more than about 20%, and the percentage of ownership of one investor not exceed more than 5%, and the ratio of total foreign ownership cannot be more than 10% of the total market value of the market, and also prohibits foreigners to buy shares at companies which its main activity in the regions of Mecca and Medina.
And perhaps these conditions are justified, from the standpoint of Kabara, especially as the primary goal of opening up the market to foreigners, is to increase the participation of institutions in a market individuals dominate 90% of transactions, a larger proportion of those in Egypt, where individuals controlled 70% of total trading, which contributes to provide more stability and reduce volatility, and also increase transparency in the state whose economy is one of the 20 largest economies in the world.
Kabara sees that the Saudi market unlikely will witness big rise in the short term due to the opening of the market, «especially as it has increased significantly since the beginning of the year affected by the announcement of opening of the market, and that this step came into force before the start of the month of Ramadan, which when the market activity decreases usually in Kingdom».
Saudi index rose slightly in the first day, before falling in two consecutive days, then rose yesterday in early trading slightly as well.