Saudi Arabia has announced structural changes to its stock exchange and has lowered restrictions on foreign investors, paving a way of increased investments in the biggest stock exchange in the Middle East.
The kingdoms Riyadh-based market regulator, the Capital Market Authority (CMA), has doubled the limit for Qualified Foreign Investors (QFIs) to own up to 10 per cent stake in a listed company. QFIs, the institutional investors who can directly buy and sell Saudi stocks, together with their affiliates was previously restricted to 5 per cent holding in a single company, the CMA said.
Foreign investors, resident or non-resident are allowed to own up to 49 per cent of the single company.
The limit of asset under management for investors to be licensed as QFIs by CMA has also been lowered to $1bn from previous $5bn.
The new rules and their effective date will be published by the end of the first half of 2017, the CMA added.
Among the structural changes introduced at the Saudi Stock Exchange (Tadawul) is the CMA approval for extension of T+0 (same-day settlement of transactions on the bourse between buyers and sellers) to T+2, which will lure more foreign investments in the market.
The CMA said it had also approved the introduction of securities lending and covered short-selling to the market, with regulations for that to be issued before the end of the first half of 2017.
The CMA chairman, Mohammed al-Jadaan, said the regulator is working with the exchange to finalise the new rules before the mid next year deadline.
Short-selling and stock borrowing and lending will not be limited to Saudi investors only and all foreign investors will be able benefit of the new market tools, Jaadan told the Euromoney Saudi Arabia conference in Riyadh. This is the synchronising of Saudi Stock Exchange with the global markets.
He said the decision to lower the limit of assets under management was taken as the institutional investors who hit $1bn mark are very interested in investing in Tadawul.