Saudi bourse wants foreigners but fears 'hot' money
Saudi Arabia plans to open further the biggest Arab bourse to foreign investors but will do so only in gradual steps for fear of letting in "hot" speculative money, the head of the Kingdom's financial regulator told Reuters.
The world's top oil exporter might also allow foreigners access to its secondary bond market and wants more corporate statements in English, Abdulrahman Al-Tuwaijri, chairman of the capital market authority (CMA), said in an interview on Monday.
Saudi Arabia has started opening up its stock market, the region's biggest by far and most liquid, through indirect ownership and most recently exchange traded funds (ETFs) that track indices.
But Al-Tuwaijri cautioned that the Kingdom, a highly conservative country whose financial markets were long closed, would take its time amid worries about speculative money.
"It is not that I want to shield the Saudi market... (but) we are more concerned about hot money and we want to see it in a very well organized way that they are coming into our...market," he said.
With the Gulf Arab kingdom benefiting from high oil prices and rolling out a $400 billion infrastructure program - the world's biggest stimulus relative to GDP - foreign banks are keen on the Saudi stock market and biggest Arab economy.
HSBC and Deutsche Bank have both set up shop to start buying or covering Saudi shares while Goldman Sachs issued bullish research notes on six Saudi banks.
But foreigners still make up only a fraction of trading. Big investors such as pension funds want the right to buy shares directly and not go through Saudi intermediaries who technically own the stock under the current rules.
As a next step to broader access, Saudi Arabia will allow more ETFs which are traded like stocks, while other ways to invest are being studied, Al-Tuwaijri said.
Al-Tuwaijri did not rule out opening up the new market for secondary bonds and Islamic issues, or sukuk, to foreigners but said this would have to wait.
"I think for the time being it is only for residents but this is probably another issue that needs to be discussed."
Saudi Arabia would also not allow shorting stocks in the near term, he added. "Probably we will look at it but probably we will not introduce it soon."
He said the regulator will continue a campaign to fight bourse violations after withdrawing 22 financial licenses and slapping dozens of fines on firms and investors, among them big names such as the biggest Islamic bank, Al-Rajhi Bank.
In February, Saudi travel agency Al-Tayyar Travel Group canceled an initial public offering due to weak demand.