The opening of the Saudi stock market would be a major positive for the Middle East North Africa (MENA) region, with a total market capitalisation expected at USD 1.2 trillion, says a report.
Saudi Arabia alone accounts for 45 percent of market capitalisation and regional liquidity is around USD 4 billion of which Saudi Arabia represents 65 percent.
"With over 160 listed securities the kingdom's stock market offers a diversified sector base," Aleksandar Stojanovski, research analyst at Deutsche Bank, said.
Following a cabinet approval, the largest equity market in the MENA region, Saudi Arabia, should soon become open for direct foreign investments.
The long-awaited move would finally come to pass once the Capital Market Authority (CMA) formalises the timing and guidelines, with the issuance of the letter within 30 days, followed by a consultation period of 90 days and likely opening of the market during the first half of 2015.
Saudi equities are currently accessible only indirectly for foreign investors and estimates see less than 1 per cent foreign ownership of the market versus regional peers, where direct investments are available, with foreign ownership accounting for around 8 percent.
"After opening of the Saudi market and assuming foreign ownership reaches a similar level to the regional equity markets, we could see up to around USD 35 billion of incremental foreign inflow as against the approximately USD 4 billion that foreigners have accumulated since 2009, when indirect ownership first became available," said Stojanovski.
Saudi Arabia is seen as the most liquid market in the region, with a 6 months average daily trading volume (ADTV) of USD 2.5 billion, accounting for 65 percent of the regional liquidity.
This year, UAE and Qatar joined the Emerging Markets index with weights of 0.58 percent and 0.47 percent, respectively.
