Saudi Stock Exchange activity slows

04 June 2015

Index falls as Tadawul prepares for foreign investors

  • Saudi Arabia’s stock exchange, the Tadawul, fell by 1.5 per cent in May 2015
  • The tradings volumes declined dramatically
  • Activity is expected to increase when the Tadawul opens to direct foreign investment on 15 June

The Saudi Stock Exchange (Tadawul) recorded a 1.5 per cent fall in its all-shares index (Tasi) to 9,688.69 points over the month of May.

The value of shares traded dropped by 17.7 per cent in May compared to the previous month. The number of transactions and shares traded also fell significantly.

However, the index was up 16.3 per cent since the beginning of 2015, and April saw a 12 per cent rise in the Tasi.

This is despite the Tadawul preparing to open to direct foreign institutional investors (qualified foreign investors – QFIs) on 15 June.

The introduction of foreign capital is expected to increase market capitalisation and boost trading activity.

The market is already highly liquid, however. The conditions for how foreign capital can be invested are also strict, which will spread the effects of the change.

The Tadawul has clarified regulations for QFIs, excluding five companies from foreign ownership. They are either working on developments in the religious sites of Mecca and Medina, or involved in strategic sectors, such as oil and gas.

Companies excluded from foreign ownership

It is unclear how the regulations affect the 0.6 per cent of Bahri shares already held by foreign investors.

Under the existing Swap framework for indirect foreign investment, 1.2 per cent of listed shares are already foreign owned. GCC and foreign trading accounted for about 4 per cent of trades in May.

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