For some investors, the opening of Saudi Arabia's stock market to foreigners has been billed as the most thrilling financial event of the year. But tough restrictions could dampen investor enthusiasm.
As of Monday, Saudi Arabia's stock market is allowing selected foreign investors to trade shares. The move is largely seen as a bid by the conservative Islamic kingdom to further open up to the global economy.
But analysts said they did not expect a sudden rush of funds after the opening of the Arab world's largest exchange, the Tadawul All-Shares Index, in Riyadh.
The stock exchange said in a note that "qualified foreign investors (QFIs) could commence dealing in listed shares."
The note was addressed to foreign banks, brokerage houses, fund managers and insurance companies based outside the Gulf.
But Capital Economics researchers warned there would be heavy restrictions in place concerning foreign equity ownership.
Qualified investors must have a five-year track record and at least 18.75 billion riyals ($5 billion, 4.5 billion euros) under their management. Also, each investor can hold no more than 5 percent of a given stock.
Market experts assumed that Saudi Arabia's move was not about boosting investment, with market capitalization exceeding $500 billion. Rather, the main payoff from attracting foreign investors would be improved transparency, accountability and availability of macroeconomic data.
Investing in the market is not without risks. A fifth of stocks consisted of petrochemical firms whose earnings were tied to oil prices, which have plunged by 40 percent from a year ago, Capital Economics noted.
hg/pad (AFP, Reuters)