By Souhail Karam
RIYADH, Aug 20 (Reuters) - Saudi Arabia said on Wednesday it would allow foreigners to buy shares listed on its stock market through licensed intermediaries, a major step toward opening the largest Arab bourse to foreign capital.
The stock market, Tadawul, has been the least open among Gulf Arab bourses to foreign investors, up to now giving foreigners access to stocks only through select funds.
As part of plans to diversify the market's investor base, the Capital Markets Authority (CMA) said foreign investors are now entitled to buy shares through certain licensed Saudi investors, who would be the legal owners of the shares.
Under the measure, potential foreign investors would be entitled to returns related to their share purchases and must take on all of the economic exposure, the CMA said in a statement on the bourse website.
"The authority ... approved that licensed individuals sign swap agreements with non-resident foreigners -- institutional or individual -- for the purpose of transferring the economic benefits of shares in Saudi listed companies to those persons," it said.