Saudi Arabia Opens Its Stock Exchange To Foreign Investors

Transcript

STEVE INSKEEP, HOST:

Today, Saudi Arabia's opening its stock market to direct foreign investment. Until now, it has not been easy for outsiders to access the stock market of an oil-rich country where the market value is more than $500 billion. International investors may not all dive in at once. But this move is designed to inspire deeper change in the Saudi economy, and it may even influence Saudi society. Here's NPR's Deborah Amos.

DEBORAH AMOS, BYLINE: The Saudi stock market is part of life here, just like a weekend outing to this complex of restaurants and parks on the outskirts of Riyadh. If you have a bank account, you're in the market, one trader explained. Saudis talk stocks over dinner, make trades on smartphones at work. Khald al-Nifie says he and his wife decided that opening the market to international investors will be good for them.

KHALD AL-NIFIE: I put all what I own right now in stock market, yeah, yeah. I'm all in right now.

AMOS: Why?

AL-NIFIE: It's a good opportunity for the Saudis to make money. At least I can get 10 to 20 percent.

AMOS: The Saudi market had been limited to Saudis. They made 2.3 billion trades a day on only 169 publicly traded companies. It's highly volatile. The new rule opens the market to global investors - but only institutions with at least $5 billion in assets. Officials here hope institutional investors will curb volatility. They also want the outside expertise these institutions will bring. It's already changing al-Nifie's ideas about investing.

AL-NIFIE: So we put our money - we will not take it out until, like, six to one year from now.

AMOS: So you're long-term?

AL-NIFIE: Yes. Long-term, so...

AMOS: Or Saudi long-term.

AL-NIFIE: Saudi long-term (laughter). It's very different, yeah?

AMOS: The dramatic drop in oil prices is part of the reason the Saudis are opening the market. It's trying to boost the private sector, diversify the economy to produce more jobs, especially for young Saudis who are more than 60 percent of the population.

DAVID KOTOK: The Saudi market will have good governance and strong transparency because it has to.

AMOS: That's investment advisor David Kotok in Sarasota, Fla. The Saudis have put in tough new regulations. The listed firms have to publish their annual reports on time and in English.

KOTOK: And the folks who make those decisions are very well trained in the finest business schools in the United States, in the U.K. and elsewhere. They will make sure it's a success.

AMOS: The opening is also expected to cautiously change social policy. As banks ramp up, more Saudi women, highly trained economists, have been hired. Abdullah Hamed, an Internet entrepreneur, remembers the dramatic stock market crash in 2006. It wiped out small investors who didn't believe the market could go down.

ABDULLAH HAMED: We've seen a lot of people try to gamble more than actually invest. And, yeah, that didn't go well for a lot of them.

AMOS: International investors, he says, will drive out companies that can't meet global standards.

HAMED: These kind of companies won't do very well once it opens up to the international market.

AMOS: So this makes it all transparent?

HAMED: Yeah, of course. I mean, it's - if something doesn't get solved by law, it usually gets solved by the open market. So I'm looking forward to that.

AMOS: There are no noisy trading floors here. Most transactions are online. And Saudis are watching the bottom line. Analysts say the opening is unlikely to make the market jump on the first day but expect $25 billion to $50 billion in investments within the first few years. Deborah Amos, NPR News, Riyadh. Transcript provided by NPR, Copyright NPR.