Morgan Stanley and Deutsche Bank have become the first investment banks to enter into swap agreements on stocks listed on the Saudi Arabian stock market (Tadawul).
The announcement follows recent approval from Saudi Arabia’s Capital Markets Authority (CMA) that allows “authorised persons” to enter into swap agreements with non-resident foreign investors for individual stocks.
Swap agreements allow investors to take advantage of the economic benefits of companies’ shares without retaining legal ownership of them. Previously, foreign non-resident investors were only able to access the Tadawul via mutual funds.
Deutsche Bank is conducting all swap agreements through its subsidiary in the kingdom, Deutsche Securities Saudi Arabia, while Morgan Stanley will use its Saudi arm, Morgan Stanley Saudi Arabia (MSSA). Saudi Arabia’s stock market is currently the eleventh largest in the world.
“The CMA’s move to enable foreign investors to indirectly access Saudi Arabian stocks is extremely welcome,” said Craig Niven, managing director at Morgan Stanley, in a statement. “Interest from international investors in the GCC’s (Gulf Cooperation Council) biggest capital market is very high, and we expect to see a lot more interest in these swap transactions from investors around the world.”