Why foreign investors buy shares in Saudi Arabia?

Foreign investors bought 2.33 percent of all shares purchased on Saudi Arabia’s stock market in June, the first month since new rules allowed more overseas investment in the Arab world’s largest bourse, data showed on Thursday.

Overseas investors, including residents and holders of swaps and qualified foreign investment licences, purchased 2.63 billion riyals ($701.4 million) of shares.

They sold 3.57 billion riyals of shares during the same period, or 3.16 percent of total shares sold.

That compared with May when foreigners purchased 1.35 billion riyals of shares, accounting for 0.83 percent of total shares bought. The same month, they sold 1.29 billion riyals in shares, or 0.80 percent of total shares sold. The transactions were made solely through swaps that month.

The exchange opened its doors to foreigners to invest directly into shares on June 15, a move fund managers believe will lead to tens of billions of dollars eventually flowing into the market.

But the data showed Saudi investors still dominate trading. They bought 107.78 billion riyals of shares during June, equating to 95.55 percent of the total. Saudis sold 107.43 billion of shares, or 95.24 percent of those sold.

Gulf Cooperation Council investors bought 2.40 billion shares, or 2.12 percent of the total, and sold 1.81 billion riyals, equating to 1.60 percent of the total.

The total value of shares traded for the month reached 112.81 billion riyals, decreasing by 30.54 percent from the previous month, the data showed.

The holy month of Ramadan begun in June, a period where trading volumes in the Muslim world traditionally slow as working hours are reduced. Gulf Business