Saudi Arabia shares rally as foreigners gain access

By Daliah Merzaban

DUBAI, Aug 23 (Reuters) - Saudi Arabian blue chips rallied on Saturday as the world's top oil exporter began allowing foreigners to buy shares listed on its stock market through licensed intermediaries.

The benchmark index of the largest Arab bourse .TASI, which is down more than 23 percent this year, jumped 3.51 percent to 8,760.10 points at 0926 GMT on the first trading day since the market regulator liberalised foreign trading rules.

As part of plans to diversify the market's investor base, the Capital Markets Authority said on Wednesday foreigners were now entitled to buy shares through certain licensed Saudi investors, who would be the legal owners of the shares. [ID:nLK523525]

"Foreigners have been waiting a long time for this step," says Hesham Abou Jamee, head of asset management at Riyadh-based Bakheet Investment Group.

"The market is reacting to the news. At 8,000 points, the market is very low, and a lot of stocks are trading are good value."

Saudi Basic Industries Corp 2010.SE (SABIC), the world's biggest chemicals company by market value, gained 3.4 percent to 129.25 riyals, a 62 percent discount to HSBC's 210-riyal target price for the stock.

Al-Rajhi Bank 1120.SE, the largest Gulf bank by market value, jumped 6.75 percent.

"This change has come at a time when the Saudi stock market is trading at trough valuations," EFG-Hermes said in a note on Saturday. "In our view, current levels offer substantial upside for investors," said EFG, which named SABIC and Al-Rajhi among its "favoured stocks".

Saudi Arabia's market has been the least open among Gulf Arab bourses to foreign investors, up to now giving foreigners access to stocks only through select funds.

The new rule should translate into direct demand for underlying shares, EFG said.

Long dominated by day traders, the Saudi stock market has been trying to improve transparency and gain more institutional investors since a market crash in 2006.

It is poised to close higher for a ninth trading day running on Saturday, in a rally initially triggered by the implementation of a new transparency rule on Aug. 16 whereby the exchange names investors with stakes of 5 percent or more in listed firms. (Reporting by Daliah Merzaban, editing by Mike Peacock)