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Not Even Aramco’s Giant IPO Can Get Saudis Trading More Stocks

Paul Wallace and Filipe Pacheco

(Bloomberg) -- If anything could push up trading volumes on a stock market, you’d think it would be the world’s biggest initial public offering and an upgrade from two of the main providers of global equity indexes.

Not so with Saudi Arabia.

Turnover on the Tadawul exchange in Riyadh has averaged 3.6 billion riyals ($960 million) a day over the past year, which is 16% below the gauge’s five-year average.

That’s despite Saudi stocks being promoted to emerging-market status by MSCI Inc. and FTSE Russell in 2019 and oil giant Saudi Aramco’s $29.4 billion listing in December. While there were trading spikes around those events, they proved short-lived.

“The level of activity is significantly down” in the past six months, Hasnain Malik, Dubai-based head of equity strategy at Tellimer, said in an interview with Bloomberg TV on Wednesday. “What it really shows is the lack of confidence within the local investor base.”

The Islamic kingdom has stepped up efforts to diversify from oil and boost foreign investment since crude prices crashed in 2014, causing its economy to slow. It allowed foreigners to buy equities directly for the first time in 2015.

Despite such efforts, it’s still lagging several global peers. The main stock indexes in South Africa and Turkey each posted average daily turnover of $1.4 billion in the past year. The figure for Brazil was $3.2 billion.

--With assistance from Yousef Gamal El-Din and Manus Cranny.

To contact the reporters on this story: Paul Wallace in Dubai at pwallace25@bloomberg.net;Filipe Pacheco in Dubai at fpacheco4@bloomberg.net

To contact the editors responsible for this story: Alex Nicholson at anicholson6@bloomberg.net, ;Blaise Robinson at brobinson58@bloomberg.net, John Viljoen, Jon Menon

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