Greetings PITAconsumers… and best wishes to those of you observing the practice of abstaining from food, drink, and smoking 😉 from sunrise to sunset. Fasting has begun on the first day of the Ramadan month! But for those fasting and non-fasting, we can now all hear, “SELL, SELL, SELL” in Arabic/English/French on the Saudi Stock Exchange floor. Hence, we can all celebrate how on June 16th, the last of the G-20 countries, Saudi Arabia, opened up its stock exchange to foreign companies.
Saudi’s stock exchange is ‘Tadawul’ and operates from Sunday though Thursday, while trading is allowed between 11am to 3:30pm. There are only 165 companies, and here’s why according to BBC:
there are a multitude of rules to determine who can invest in the gradual opening-up of the Middle East’s biggest stock market.
They appear to be quite restrictive. Only institutions that manage $5bn (£3.2bn) of assets (or $3bn if the regulator makes an exception) with a five-year investment record will be given the green light for now.
No single investor can own more than 5% of a company and overall foreign ownership of that company cannot top 49%. Overall, only 10% of equity in the stock exchange, called the Tadawul, can be foreign-owned.
Saudi Arabia could be exercising caution for non-economic reasons. With more openness to foreign investment, comes more opportunities to open debate to outside (and internal) discussions on social and political reforms. Foreign companies will have more say on the ongoing labor practices, many of which rely on quotas and exploiting foreign labor from its poorer neighbors: Yemen, Pakistan, Indonesia, Philippines, and India.
Given Saudi’s new king — but still old (age 79) and from the generation that first witnessed Saudi’s growth between World War I and World War II — H.E. Salman, cabinet reshuffle, and the recent transformation of its ‘Supreme Oil Council’ expanding into the ‘Supreme Economic Council’, the ruling powers acknowledge the demographic shift since the 1980s. Let’s wait and see if all changes or “non-changes” are solely because of oil’s existence.