Saudi to allow Morgan Stanley to set up fund

Morgan Stanley will be allowed to set up a fund to invest in Saudi equities, Saudi Arabia's stock market regulator said yesterday, in a move that could attract more foreign investors' to the largest Arab bourse.

The world's biggest oil exporter places restrictions on investors from outside the region buying shares, allowing only investors based in one of the other Gulf states to invest directly in stocks.

In a move designed to help the Kingdom develop its financial markets, the Saudi Capital Markets Authority (CMA) said in a statement on the bourse website it would allow Morgan Stanley to set up a fund to invest in Saudi stocks.

The regulator said last December the Kingdom would gradually begin allowing foreign money in through licensed firms.

That month, HSBC said it was launching two indexes and associate funds to give global investors exposure to firms including Saudi Basic Industries Corp (Sabic).

Gulf countries are easing restrictions on foreign investment after a share market rout in 2006, when four of the region's seven stock benchmarks lost most than 35 per cent of their value.

Regulators hope foreign institutional investors will eventually overtake domestic retailers as the main drivers of trading, making their markets less volatile.

The Saudi index is the worst-performing Gulf benchmark, down almost 27 per cent so far this year.

In a move to improve transparency, the operator said last month it would name investors with stakes of five per cent or more in listed firms.