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(Changes Dubai to London in tenth paragraph and adds eleventhparagraph to clarify that Adel-al-Ghamdi did not discussspecific licenses.)
By Tariro Mzezewa
June 25 (Reuters) - One week after Saudi Arabia opened itsstock market to direct foreign investment, U.S. mutual fundmanagers say they are interested but not rushing to invest inthe Middle East's biggest economy.
Foreign fund inflows are slower than initially expected, inpart because U.S. fund companies like Fidelity and HardingLoevner are digesting numerous regulations set forth by theSaudi Capital Market Authority (CMA) for participation in the$575 billion market.
"Investors are in the learn and plan stage, not the investstage yet and the message is that the opening up is more of anevolution than a revolution," said Adam Kutas, manager ofFidelity's Emerging Europe, Middle East, Africa fund.
The investment stage, according to Kutas, will come in thenext several months.
To buy shares, foreign investors must apply for a licensefrom the CMA. Only institutions that manage $5 billion of assetsand have a five-year record of investing outside the countrieswhere they are based are allowed to participate.
No single foreign investor can own more than 5 percent of acompany and overall foreign investment in a company cannot bemore than 49 percent. Additionally, there is a 20 percentceiling for all qualified foreign investors in any one stock andin total these holdings cannot exceed 10 percent of the wholemarket.
Until now, foreign investors have been restricted to buyingshares in the market indirectly through swaps or exchange-tradedfunds.
"We are very interested, but we don't know the rules, so weare moving gradually because the process to become an investoris very vague," said Asha Mehta, lead portfolio manager forAcadian Asset Management's Acadian Emerging Markets Portfolio, which manages $70 billion in assets globally.
Pradipta Chakrabortty, lead manager of Harding Loevner'sFrontier Emerging Markets Portfolio, is alsointerested in investing directly via the Saudi stock exchange,or Tadawul, but is still in the process of analyzing the variousrequirements.
Stock exchange chief Adel-al-Ghamdi told Reuters in Londonthat six applications from foreign investors for participationin the market are being processed.
Ashmore Group and HSBC Holdings have beengranted licenses so far.
Fund managers suggest tens of billions of dollars willeventually enter the country as a result of the opening.[ID:nL5N0XD35P}
"We see international appetite building up even if we don'texpect this to translate into immediate on-the-groundinvestments in the short term," said John Sfakianakis, directorof Middle East investing at Ashmore.
(Reporting by Tariro Mzezewa; Editing by Linda Stern and TomBrown)
