Published: July 6, 2015
Only way is up
The run-up to the liberalisation of the Tadawul was infused with feverish expectation. The day itself was muted in comparison
Like so many hyped events, the first day of liberalised trading on the Tadawul, Saudi Arabia’s Stock Exchange, was a little bit underwhelming. Many commentators expected foreign investors to be queuing up at the door, waiting for entry into a room full of blue chip shares from previously inaccessible multi-billion-dollar market-cap companies.
In the event, the exchange actually finished the day down by 0.9% at 9561.70, with foreign investors buying shares in less than 5% of listed equities, according to trading data published on the Tadawul’s website. There are a number of reasons for this, many of which are to do with uncertainty and a lack of regulatory clarity.
Under rules laid out by the Saudi Capital Markets Authority, only registered qualified foreign investors (QFIs) are allowed to buy shares on the exchange. To qualify, investors have to have at least US$5bn in assets under management and to have been operational for at least five years. Foreign investors are barred from owning more than 5% of issued shares in any single company, and QFIs together are able to own no more than 20%.