(MENAFN- Khaleej Times) Saudi Arabian stocks retreated the most in more than a month after the Opec's biggest oil exporter opened its equity market to direct foreign investment for the first time.
The Tadawul All Share Index fell 0.9 per cent to 9,561.70 at the close in Riyadh after earlier swinging between gains and losses. Saudi Basic Industries Corp, the world's top petrochemicals manufacturer by sales, led the drop with a 1.6 per cent decrease. Al Rajhi Bank, the lender with the biggest weighting on the benchmark index, followed with a 1.2 per cent decline.
As of Monday, approved investors from outside the six-nation GCC can own Saudi stocks directly, as the Custodian of the Two Holy Mosque, King Salman bin Abdulaziz of Saudi Arabia, pushes ahead with efforts to diversify the Arab world's biggest economy away from oil. Saudi Arabia's market is worth more than all the other major GCC markets combined.
"Those investors won't be in the market until October," Mohammed Al Suwayed, a Riyadh-based financial analyst and partner at SPT Investors, a market-analytics company, said by phone. "It will take a while to get their applications approved by the Capital Market Authority [CMA]."
The Riyadh-based CMA last month published regulations allowing foreigners access starting today. Investors from outside the GCC previously gained entry through equity swaps and exchange-traded funds.
Direct trading is restricted to institutional investors with a minimum of about $5 billion in assets under management and at least five years of experience. Holdings in a single equity for one qualified foreign investor, or QFI, are capped at five per cent, while QFIs holdings in a single stock is capped at 20 per cent. All in all, QFI holdings won't exceed 10 per cent of the whole market.
Foreigners - both resident and non-resident - will be able to own as much as 49 per cent of a single stock.
The rules "will evolve as we go forward," Adel Al Ghamdi, the chief executive officer of the stock exchange, said in an interview in London. "Nothing is set in stone."
Meanwhile, HSBC Holdings has received a qualified foreign investor licence in Saudi Arabia and traded shares on the bourse on Monday, the first day that direct foreign investment was allowed, the bank told Reuters.
The CMA has not yet announced any licence awards, but stock exchange CEO Adel Al Ghamdi told Reuters in London that the first transaction by a qualified foreign investor was due to take place on Monday. He did not name the investor.
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