Saudi Arabia's Capital Market Authority is in discussions with international banks to open the country's stock exchange to foreign investors early next year, Bloomberg News reported Tuesday, citing three bankers familiar with the matter said. The market regulator is working with the banks to prepare for the introduction of foreign investors to the region's largest stock market as early as the first quarter of 2012, said the bankers, who declined to be identified because the discussions are private. Foreign, non-Gulf investors currently can't directly invest in Saudi shares. The Kingdom allowed citizens of neighboring Gulf countries to buy and sell shares freely in 2007. Non-resident foreigners are permitted to trade through share-swap transactions and exchange-traded funds, with the market regulator approving the first ETF in March 2010. A spokesman for the Capital Market Authority wasn't immediately able to comment and the media relations officer at the stock exchange declined to comment when contacted by Bloomberg News. Ahmed Beydoun, Deutsche Bank's head of MENA equities told Reuters in a telephone interview early this week that he saw opening Saudi bourse to foreigners "happening very soon." "The Saudis have been very vocal in the last month on that and their desire to be included in MSCI. They say they would like to open up but all the factors have to be considered." 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 Gulf Cooperation Council (GCC) - including the Abu Dhabi and Dubai exchanges - of $331.4 billion. Saudi currently has no classification within the influential MSCI indices, but its size would likely gain it emerging market status if it were to join. Market estimates put the Kingdom's potential weighting at 2.5 to 3 percent, which would be around double Turkey's current position. Emerging market status within MSCI is important as many international fund managers will only track stocks in countries which have achieved this mark.
