Saudi Arabia could shortly open its stock exchange to foreign investors, Deutsche Bank's head of Mena equities said, a move which would allow international capital to own shares outright on the Middle East's largest bourse for the first time. “I do see it happening very soon,” Ahmed Beydoun told Reuters in a telephone interview. Presently, international investors can only buy into Saudi shares through equity swap arrangements, where a licensed intermediary in the kingdom holds the stock on their behalf, or a small number of exchange traded funds (ETFs). However, there has long been foreign demand to have access to the Tadawul bourse, which had a total market capitalization of SR1.2 billion ($323.7 billion) at the end of September, according to bourse data. This is nearly on par with the combined bourse capitalization of the other six domestic exchanges in the GCC - including the Abu Dhabi and Dubai exchanges - of $331.4 billion, according to Thomson Reuters data. Market estimates put the Kingdom's potential weighting at 2.5 to 3 percent, which would be around double of Turkey's current position. Equity issuance out of the Middle East has been subdued since the 2008 financial crisis, with only sporadic deals on regional bourses in that time. Global economic turmoil, poor regional investor sentiment and the unrest caused by the Arab Spring have all contributed to the lack of initial public offerings, with a number of entities awaiting the right conditions before going public. “The pipeline continues to be heavy,” Beydoun said.
