How SDRs help Saudi investors access global markets
SDRs are financial instruments that allow investors in Saudi Arabia to access shares of international companies without owning the actual shares.
They are issued by a local financial institution or depositary bank in Saudi Arabia and represent a certain number of shares in a foreign company. Essentially, SDRs mirror the actual shares traded in the company's home market.
Listing SDRs on Tadawul can attract Saudi-based investors who want exposure to international markets without directly investing in foreign exchanges. This broader investor base can boost the company's market visibility and increase trading volumes.
These instruments are designed to facilitate cross-border investments, enabling Saudi-based investors to diversify their portfolios by investing in foreign companies while trading in their local currency and adhering to domestic regulatory frameworks.
SDRs are traded on Tadawul just like regular shares, making them accessible to local investors without the need to navigate the complexities of foreign markets.
SDRs offer several advantages that appeal to Saudi-based investors, including diversification benefits, easy access, tax advantages, liquidity, and transparency.
The appeal of SDRs ultimately depends on factors such as the company's performance, geopolitical issues, and market conditions.
SDRs are traded on Tadawul just like regular shares, making them accessible to local investors without the need to navigate the complexities of foreign markets.
At the Saudi Capital Forum in Riyadh last February, where BMG Financial Group and Dalipal Holdings Limited were sponsors, we discussed with Tadawul officials how Dalipal, listed on the Hong Kong Stock Exchange, could benefit from the issuance of SDRs once launched.
BMG and Dalipal have signed a memorandum of understanding to explore a dual listing and the issuance of SDRs.
For Dalipal, issuing SDRs will align with Vision 2030, enhance their global brand recognition, mitigate geopolitical risks, and improve liquidity.
It is also notable that Dalipal plans to expand its manufacturing facilities to produce advanced pipes for the oil, gas, and hydrogen sectors.
They are already preparing their site at King Salman Energy Park in Dammam, Eastern Province. Their SDRs are a link with Saudi investors, fostering a mutually beneficial relationship that promotes cross-border investment and economic integration.
The SDRs initiative marks the debut of depository receipts in the Saudi financial market. It is seen as a strategic step toward reinforcing Riyadh's position as a global financial centre, in line with the country's Financial Sector Development Program.
• Basil M.K. Al-Ghalayini is chairman and CEO of BMG Financial Group.
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