(MENAFN - Arab News) Investors are seeking access to Saudi Arabia as the government pursues a spending plan of more than 500 billion in an effort to boost the nonoil economy.
Saudi Basic Industries Corp. (SABIC) yesterday helped the Tadawul All-Share Index end slightly higher for a second day. SABIC climbed 0.8 percent.
Analysts say investors are reacting positively to the surprise change of the Capital Market Authority chairman announced last week.
Custodian of the Two Holy Mosques King Abdullah replaced Abdulrahman Al-Tuweijri with Mohammed bin Abdulmalik Al-Sheikh in a royal decree on Tuesday.
The market gained strength yesterday as a top investment manager said that foreign investment in Saudi stocks would attract 25 billion to 30 billion in inflows.
Saudi Arabia may allow foreigners to invest directly in stocks in the next year, John Burbank, founder of 3.7 billion San Francisco-based hedge fund Passport Capital LLC, was quoted as saying in a Bloomberg report.
"The place that we probably have by far the biggest weight relative to other people would be Saudi Arabia, which is our favorite emerging market," Burbank added in the report.
Passport has about 17 percent of its capital invested in the Saudi bourse. "We think the market's going to open up in the next year."
The Kingdom allows non- resident foreigners to invest in shares through equity swaps and exchange-traded funds.
Foreigners account for about 2 percent of investments in the bourse, Burbank was quoted as saying.
MSCI Inc., whose gauges are tracked by investors managing 7 trillion, last year resumed Saudi coverage and said it would consider including the nation in frontier or emerging market indexes if it allows direct access to foreigners.
"What we're interested in is the domestic economy," said Burbank.
Total equity market capitalization at the end of January 2013 reached SR 1,439.76 billion ( 383.94 billion), increased by 2.81 percent over the previous month (end of December 2012).
"We view TASI as an important market which contains stocks that many foreign investors would want to own," Fahad Alturki, senior economist at Jadwa Investment, told Arab News.
He added: "In line with other global markets, TASI has started the year on a positive note, rising 3 percent year-to-date. As we have noted previously, we think the market would benefit should it open further to foreign investors, promoting stability and transparency."
He said: "Net flow of foreign investors in the market through Swap agreements has improved to SR1bn in January compared with SR66mn in December. While the Saudi regulator has built and tested a Qualified Foreign Institutional Investor (QFII) system, it remains unclear as of when this system would be officially introduced and used to facilitate foreign investor participation in the market. We expect the new chairman to take further steps on this regard and clear the uncertainty."
Basil Al-Ghalayini, CEO OF BMG Financial Group, voiced hope "complete" opening of the Saudi market to foreign investors (individuals and institutions) will be on the new chairman's priority list.
He added: "This is a critical policy which will steer the direction of the Saudi stock market. Other challenges may include; the final verdict on the fate of those suspended public companies, applying new listing rules regarding certain cyclical sectors such as construction, future strategy for licensing new Authorized Persons, the possibility for modifying the working week to align it with the rest of the GCC markets and reducing the gap with the international ones by adding Thursday instead of Saturday, etc""