A Sleeping Giant in the Process of Waking, The Saudi stock exchange

On March 29, the first Saudi exchange-traded fund open to foreigners was launched by local brokerage Falcom Financial Services with great fanfare and public relations razzamatazz. It was heralded as a way for international investors to gain access to one of the most tantalizing emerging markets. But, soon after the launch, it emerged that foreigners could only buy the product if they had a Saudi bank account.

The incident more or less sums up the slow liberalization of Saudi Arabia’s Tadawul stock market over the last three years. “It has often been a case of two steps forward and one step back,” says one local banker. “But at least we’re moving in the right direction.”

Despite being one of the largest economies in the world, and the largest stock market in the Middle East and North Africa region, Saudi Arabia still forbids foreign investors from directly owning Saudi stocks. The authorities worry that opening the doors to foreigners will lead to floods of hot money that could destabilize the economy.