Global index providers have entered talks with Saudi Arabia’s Tadawul as rumours mount that the market is ready to open to foreign investors. According to sources familiar with their plans, S&P Indices and Russell Investments are already liaising with the Saudi Arabian stock exchange regarding possible index inclusion. Both firms declined to comment, while MSCI would neither confirm nor deny the rumours of its involvement, stating: “MSCI is in continuous dialogue with nearly all global exchanges. Separately, in many cases we also have many important commercial relationships with them.” The talks come as speculation grows that Saudi Arabia may finally be ready to open to foreign investors as early as H1 2012.

“What I hear from people in Saudi is that they are actively looking at opening up the market and there have been a lot of talks between CMA and Tadawul on that subject,” Charbel Azzi, director-regional head at Middle East & Africa, S&P Indices, told Mena FM. “When will they introduce that? Nobody knows. When will they come out with the announcement? I don’t know.”

An opening up of the market would be welcomed by the local asset management community. “Further opening to foreign investors would improve transparency and market efficiency,” said Sarah Al Suhaimi, head of asset management at Jadwa Investments. “It could also re-energise the market. Volumes have been subdued for some time and share prices have fallen this year, even though listed companies’ profit grew 25% year on year during the first nine months of the year.”

Currently, the S&P Pan Arab Composite is the only regional index to include Saudi Arabia. The country was previously listed on the MSCI World index, but it was removed following a dispute between the index provider and the Tadawul in 2010.