Magazine article The Middle East

Saudi Arabia: Finalises Rules to Open Up Equities

Magazine article The Middle East

Saudi Arabia: Finalises Rules to Open Up Equities

Article excerpt

Saudi Arabia has finalised rules for direct foreign investment as it prepares to open one of the world's most restricted stock markets, worth $575 billion, on 15 June.

The Riyadh-based Capital Market Authority (CMA) will allow institutional investors with a minimum of 18.75 billion riyals ($5 billion) under management to invest directly in the $575 billion stock market, according to the regulations published on its website. The CMA has restricted foreign ownership of a single stock to 49%. The rules will be enacted 1 June, the regulator said in a statement last month.

The world's biggest oil exporter is giving foreigners access to its stock market as it pursues a $130 billion spending plan to boost non-energy industries. Income from oil accounted for almost 90% of revenue last year. Investors from outside the Gulf Cooperation Council currently access Saudi-listed shares through equity swaps and exchange-traded funds.

The kingdom's Tadawul All Share Index has risen 17% so far this year, the best performer among seven major gauges in the GCC. Saudi Arabia may be added to MSCI Inc's emerging markets index by 2017 at the earliest, accounting for about four per cent of the index Sebastien Lieblich, executive director at MSCI Index Research, said in July.

The regulator published the draft rules in August. Tadawul, with 170 listed companies, is home to Saudi Basic Industries Corp, the world's biggest petrochemicals producer by sales, Kingdom Holding Co, the investment vehicle of billionaire Prince Alwaleed bin Talal Al Saud. Al Rajhi Bank, the largest Islamic lender globally, also trades on the exchange.

A regulatory drive to reduce the volatility around initial public offers of shares is bolstering the Saudi funds sector and also creating an opportunity for international investors to sidestep the kingdom's foreign ownership restrictions. …

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