Saudi Arabia has approved the Gulf Arab state's first exchange-traded fund (ETF), which will be accessible to foreigners as part of efforts to open up the biggest Arab bourse. Saudi financial firm Falcom Financial Services won approval to list the “Falcom Saudi Equity ETF” on the bourse, the Capital Market Authority (CMA) said in a statement on Tuesday. The world's top oil exporter has been trying to encourage more foreign money to its bourse, having recently allowed indirect foreign ownership via so-called swap agreements. Analysts say the move might coax big international investors to enter on a larger scale. ETFs usually track an index and can be traded like securities. CMA head Abdulrahman Al-Tuwaijri has said in a newspaper interview Saudi Arabia wanted to further open up the bourse by launching ETFs this month without allowing risky “hot” money to flow in, hinting that full ownership was not on the cards. The move coincides with a campaign by the regulator against insider trading, which has involved heavy fines on banks and the withdrawal of financial licenses. The total market capitalization of listed Saudi companies is about $319 billion, almost as much as the rest of the Gulf markets combined. The Dow Jones Saudi Arabia Titans 30 Index, which tracks 30 large-cap Saudi companies, has jumped 63 percent in dollar terms over the past 12 months. However, analysts caution that direct investment in individual companies won't necessarily follow from the recent announcement on index funds. Nor are they expecting much additional transparency on future market-related decisions like the recent one surrounding Ernst. Meanwhile, Saudi bank Samba Financial Group is talking to several banks about a dollar-denominated international bond issue, IFR, a unit of Thomson Reuters reported. Discussions have been taking place with a number of institutions, but no mandates have been awarded yet, IFR said, but Samba said there were no formal talks. “We would like to deny that Samba is in any formal discussions of issuance of bond at this point in time,” Samba Financial Officer Banque Saudi Fransi is meeting investors in Europe, Asia and the Middle East next week to test the waters for potential debt issuance, executives at the bank said on Wednesday. A debt sale would be the second this year after Saudi property developer Dar Al-Arkan issued a smaller-than-expected five-year Islamic bond, or Sukuk, worth $450 million.
