(Bloomberg) — Saudi Arabian stocks advanced after OPEC’s biggest oil exporter opened its equity market to direct foreign investment. The Tadawul All Share Index climbed 0.5 percent to 9,687.88 at 11:06 am in Riyadh, extending gains to a second day. Saudi Basic Industries Corp, the world’s top petrochemicals manufacturer by sales, led the increase with a 1.2 percent jump to the highest since June 3. National Commercial Bank, the largest publicly-traded lender, followed with a 0.8 percent advance.
Approved investors from outside the six-nation Gulf Cooperation Council can now own Saudi stocks directly, as King Salman 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.
“Sentiment and the expectation that significantly more capital will be attracted into the country’s stocks” are driving today’s performance, Ramez Merhi, a Dubai-based director for asset management at Al Masah Capital Ltd, which manages $500 million, said by e-mail. “International fund managers will be willing to increase their exposures to Saudi Arabia now that they can own shares in their own name.”
The Riyadh-based Capital Market Authority 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 are capped at 5 percent, while QFIs holdings in a single stock is capped at 20 percent. All in all, QFI holdings won’t exceed 10 percent of the whole market.
Foreigners — both resident and non-resident — will be able to own as much as 49 percent of a single stock.
Saudi stocks have increased 16 percent this year, more than any Middle Eastern equity index. The gauge is trading above its 50-, 100- and 200-day moving averages.
