Saudi Arabia plans to work on issuing regulations that will allow select non-resident strategic foreign investors to own direct stakes in listed companies, as the kingdom seeks to attract more international inflows into its US$440 billion stock market.
The kingdom’s Capital Market Authority and the Saudi Arabian General Investment Authority (Sagia) have signed an agreement of co-operation to collaborate on setting up the regulatory framework for directly opening up the stock market to strategic foreign investors.
Non-resident strategic foreign ownership refers to stakes of 10 per cent or more of a company’s share capital that has voting rights, excluding sectors prohibited by law.
Saudi Arabia is opening up its markets and implementing reforms, including selling stakes in companies from Saudi Arabian Oil Co. to its stock exchange, to diversify the Middle East’s biggest economy away from oil. In June, index provider MSCI Inc. put the kingdom on its watch list for potential inclusion to emerging markets.
In 2015, Saudi Arabia said it would allow qualified foreign investors (QFIs) with a minimum of five years’ experience and $5 billion of assets under management to apply for licenses to trade equities directly. The regulator set a 5% limit for a single QFI in a company, and a 20% ceiling for QFI holdings in a single stock. Since then, the authorities reduced the asset-under-management requirement to $1 billion, and raised the single-stock limit to 10%.
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