Saudi Arabia’s market watchdog Capital Market Authority (CMA) has approved a resolution that will allow foreign investors to own up to 49% of shares or debt in listed companies. The CMA has also relaxed the rules required to invest in the Kingdom’s stock markets.
The move comes as the world’s top oil exporter aims to shore up foreign investment to offset a fall in petrodollars, which was previously one of the significant sources of public income.
The relaxation of rules will also help in further developing and expanding the scope of the capital markets as the government prioritizes diversification.
In order to qualify as an investor in the Kingdom’s markets, institutions now should have at least $500 million in assets, a metric that was reduced from the previous $1 billion. According to the announcement, a single qualified foreign investor (QFI) would only be allowed to hold up to 10% of shares that are listed.
The Saudi Arabian stocks are expected to attract huge investments this year, thanks to the much talked about Saudi Aramco IPO and a possibility of being included in the MSCI emerging market index.
The foreign investors represented in the Qualified Financial Institutions (QFIs) are expected to contribute in reducing high volatility in prices. Currently foreign investment in Tadawul is low, considering the fact that only five companies in Saudi have over 40% ownership by foreigners.