Saudi Arabia is now technically ready for foreign investors to start trading on the local stock market, but a decision to lift a ban on international investment is being held up while it waits for wider government approval.

According to sources in the kingdom, several local banks have executed trades out of London offices as part of testing that the systems are ready for international investors to start trading on the Saudi Stock Exchange (Tadawul).

“We have been involved in systems testing about 5-6 months ago, and the systems are all there for international trading,” says one local banker. Another source at an international bank in Riyadh says, “We know they are ready and prepared to open the market, the question is when.”

Market regulator the Capital Market Authority (CMA) has been slowly moving toward opening the Tadawul to foreigners for years. In 2008 it introduced a swap agreement that allowed investors to buy Saudi shares, but concerns about the structure of that system mean take up has been low, estimated at under 2 per cent of all trading activity.

Sources in the country say the CMA was ready to open the market late last year, but has since had to delay the process. “The CMA was ready late last year, but now it is getting more delayed and they are taking things more slowly,” says one banker in Riyadh. “It is not yet agreed at the Council of Ministers level.”

A Saudi government source close to the CMA says that Riyadh feels no pressure to open the market, and will do it when it is ready. “If that is another six months or a year it does not matter,” he adds.

Rumours of the CMA opening the market have picked up since the start of the year, and in a bid to calm down the speculation, CMA chairman Abdulrahman al-Tuwaijri said in early April “It is still within our strategy, but it should be done in an orderly and gradual manner to make sure it does not impact the market’s stability.”