Saudi Arabia plans to start cross-listing foreign companies on its exchange within a year, with a focus on Gulf Arab firms, as it moves closer to opening up its market to foreign investors, a senior stock market official said yesterday.
Waleed Al-Bawardi, director of cash and markets at Tadawul, the Saudi exchange, said details on disclosure requirements were being hammered out with the Capital Market Authority (CMA) after the regulator amended listing rules in January to allow for cross-listing. “We are working with the regulator, trying to detail the regulations for the cross-listing,” he told Reuters ahead of an event to unveil a new Tadawul initiative at the Jeddah Chamber of Commerce & Industry.
“I think within a year we can have some companies ... The initial focus could be on the (Gulf Arab) region and then we'll see how it goes but this is still initial discussion.”
Investors are keenly watching long-awaited Saudi moves to allow foreigners to directly invest in the Middle East's largest stock market, which is valued at $337 billion. Such a move is likely to attract considerable interest as it gives direct access to bluechips like Saudi Basic Industries Corp., the world's most valuable chemical company.
Foreigners are currently only allowed to invest in Saudi firms through share swap transactions via international investment banks who deal with local markets.
The Kingdom, the Arab world's biggest economy, has taken small steps toward direct ownership. But the regulator, fearful of speculative funds flooding in, has said it will open the market to foreigners only gradually.
Al-Bawardi said the benefits of direct foreign ownership, including the stability offered by institutional investors in a market currently 95-percent dominated by retail investors, were clear.
“I think lots of work has been completed already but we are waiting for approval from the higher authorities, mainly from the regulator,” Al-Bawardi said.
Asked if the market will be opened up this year, he said, “It could be. We were expecting it to happen last year so there is lots of expectation ... It could be this year, next year or even the year after.”
IPOS AND TRADABLE RIGHTS
The world's largest oil exporter is keen to get more family-owned firms to list on the bourse, which has already seen a flurry of initial public offerings in 2012.
Six firms have listed so far this year, compared to four in all of 2011, including Alinma Tokio Marine, an affiliate of the Japanese insurance firm, and Takween Advanced Industries and Najran Cement.
The catering unit of Saudi Arabian Airlines raised SR1.3 billion ($346.7 million) in a June share sale and is slated to begin trading on July 9.
“We are anticipating more (IPOs) to come this year, I would guess about another five to six ... We think that with the appetite we are seeing there will be more to come next year,” Al-Bawardi said.
Potential IPO candidates in coming months include Construction Products Holding Co, Saudi Arabia's largest maker of building materials and a unit of Binladin Group.
It has mandated the investment banking arms of Gulf International Bank and Samba Financial Group for an IPO in 2012 or 2013, industry sources said.
Health Water Bottling, held by Saudi Arabia's family-owned Olayan Group, has picked Morgan Stanley and is planning to go public by issuing 30 percent of its shares in a flotation in the first quarter of 2013.
Additionally, private equity investor Carlyle Group plans to sell its investment in Saudi Arabia's General Lighting Co. through an IPO.
Al-Bawardi also said he expects Tadawul to introduce the option of selling tradable rights this year for investors who do not want to subscribe to a rights issue.
“He could sell it through the exchange ... This could happen this year,” he said. “We are waiting regulatory approval but we are ready for it as an exchange... We hope it will be this quarter.”