Saudi Tadawul set to hire banks for IPO of biggest Arab bourse

09/07/1435 06:50 AST

Saudi Arabia's stock exchange plans to sell shares in an initial public offering as the Arab world's largest bourse seeks to gradually open up to foreigners and boost institutional investment.

Tadawul, as the gauge is known, will hire advisers soon for the share sale, chief executive officer Adel al-Ghamdi said at a conference in Riyadh yesterday. That would make it the second market in the Gulf Co-operation Council to go public after Dubai's.

"The Saudi stock exchange is going through tremendous transition at this stage," al-Ghamdi said. "We are going public, that is our aspiration."

Saudi Arabia's $530bn gauge has rallied 14% this year, compared with a loss of 0.2% for the MSCI Emerging Markets Index. Investors are seeking access to the world's largest crude producer as the government pursues a $130bn spending plan to boost the non-oil economy. Gross domestic product will probably grow by 4.2% in 2014, the second-fastest pace in the Gulf after Qatar, economist estimates compiled by Bloomberg show.

Saudi companies are planning to raise funds as demand increases, with about 35 family businesses working with advisers on IPOs, al-Ghamdi said. Jeddah-based National Commercial Bank has said it intends to go public, while ACWA Power International in March was said to hire Saudi Fransi Capital for a share sale that could raise as much as $1.1bn.

"This is very good news for the market," said Sebastien Henin, who oversees $90mn as head of asset management at The National Investor in Abu Dhabi. The IPO of "high-profile" companies in Saudi may generate a lot of interest, he said.

John Burbank, founder of hedge fund Passport Capital, said last year that Saudi Arabia was his "favourite" emerging market. Direct foreign investment in Saudi stocks could attract $25bn to $30bn in inflows, he said at the time.

Foreign investors outside GCC countries can't buy Saudi shares directly, and access the market through equity swaps and exchange-traded funds. Mohammad al-Sheikh, chairman of the market regulator, said last year the kingdom will only open the bourse to foreigners "after intensive study and gradually."

The Tadawul All Share Index was little changed at the close in Riyadh after yesterday touching the highest level since June 2008. Trading on the gauge on Tuesday was 32% higher than the 12-month average, data compiled by Bloomberg show.

The bourse is home to the world's biggest petrochemical producer, Saudi Basic Industries Corp, as well as Al Rajhi Bank, the Gulf's biggest publicly traded lender.

Bloomberg