Saudi opening may be non-event with no licences awarded yet

The opening of Saudi Arabia’s stock market to direct foreign investment on Monday may disappoint traders who have been hoping for large and immediate fund inflows, as the kingdom has yet to announce the award of any licences.

Saudi Arabia’s Capital Market Authority announced plans to open the market last July, and bullish expectations have helped the kingdom’s stock index outperform other Gulf markets by a wide margin. It has gained 15.7 per cent this year.

But the CMA has indicated it does not want or expect large, sudden fund inflows. It has introduced tight ceilings for foreign investment and a licensing system for institutions; as of early Monday morning, it has not announced the issue of a single licence.

Only one institution, Ashmore Group, has publicly declared it has applied for a licence. John Sfakianakis, Riyadh-based Middle East Director at Ashmore, told Reuters on Sunday that Ashmore expected to receive it this month, but did not elaborate.

A rally in Saudi Arabian blue-chips on Sunday, boosting the main index 1.3 per cent, indicated some retail investors hope there will be inflows similar to those seen in the United Arab Emirates and Qatar a year earlier when they joined MSCI’s emerging markets index.

Their eventual disappointment and the advent of the Muslim holy month of Ramadan, expected to begin on June 18, may put pressure on the market in coming days.

Elsewhere in the region, markets may continue moving sideways in the absence of major news. Dubai’s Amlak Finance , which tumbled to hit its daily 10 per cent limit for two sessions in a row, may fall further as it had more than doubled within just a week before investors started taking profits.

Dubai developer Emaar Properties on Monday played down Polish media reports which said it planned large investments in the Eastern European country. Emaar said it regularly reviewed potential investment opportunities and would “inform the market as and when any such opportunity is finalised”.

Oil prices extended declines on Monday after two straight days of losses late last week, as high production offset strong refinery runs.

In global markets, Asian shares slipped on Monday, tracking Wall Street, which closed lower on Friday on expectations that the U.S. Federal Reserve may raise interest rates as early as this autumn. The Fed’s policy-setting committee will hold a regular meeting on Tuesday and Wednesday this week.