JEDDAH: Foreign investors’ interest in the Saudi stock market is expected to start picking up gradually as both domestic and international developments add to already improving sentiment, according to Jadwa Investment.
“We believe that encouraging qualified foreign institutional investors’ (QFIs) entry into Tadawul will have positive implications for the Saudi economy,” Jadwa said in a recent research note.
A number of major developments have taken place in the Kingdom in the last few weeks underlining the government’s commitment to implementing structural economic reform.
“In April, we saw the unveiling of the Saudi Vision 2030 and, more recently, we saw major changes on a ministerial level. Packed in between all these announcements was an equally important but perhaps less publicized announcement by the Capital Market Authority (CMA), which will have a major impact on the Saudi Stock Exchange (Tadawul),” said the Jadwa report.
While some of these amendments focused on loosening previous rules on participation and ownership levels of qualified foreign institutional investors (QFIs), another strand of these reforms introduced new types of trading options and settlement processes, in line with international standards, according to Jadwa Investment.
As the region’s largest, diverse and most mature capital market, these rules, when applied, during H1 2017, will mean that Tadawul will lead the region in being the first to introduce market instruments and processes that not only increase market liquidity, but also add to institutional confidence and investor choice.
While these latest set of rules/amendments form a part of a longstanding plan to further open up Tadawul, they have been given added impetus as a result of the broader reforms set out by the Saudi Vision 2030 plan, said the report.
One strand of the CMA’s recent set of amendments aim to loosen rules for the participation previously set out on QFIs.
These include:
l QFIs wanting to participate in Tadawul will have to have at least $1 billion assets under management (AUM) (previously $5 billion) and have been operational for a minimum of 5 years.
l Each QFI (including affiliates) can only hold a maximum of 10 percent (previously 5 percent) of issued shares of any one listed company.
l The elimination of the clause relating to QFIs together only owning a maximum of 20 percent of issued shares of any one listed company.
l All foreign investors (including residents and non-residents, swaps and QFIs) will still only be able to have a combined ceiling of 49 percent ownership of issued shares, in any one listed company.
“We believe that encouraging qualified foreign institutional investors’ (QFIs) entry into Tadawul will have positive implications for the Saudi economy,” Jadwa said in a recent research note.
A number of major developments have taken place in the Kingdom in the last few weeks underlining the government’s commitment to implementing structural economic reform.
“In April, we saw the unveiling of the Saudi Vision 2030 and, more recently, we saw major changes on a ministerial level. Packed in between all these announcements was an equally important but perhaps less publicized announcement by the Capital Market Authority (CMA), which will have a major impact on the Saudi Stock Exchange (Tadawul),” said the Jadwa report.
While some of these amendments focused on loosening previous rules on participation and ownership levels of qualified foreign institutional investors (QFIs), another strand of these reforms introduced new types of trading options and settlement processes, in line with international standards, according to Jadwa Investment.
As the region’s largest, diverse and most mature capital market, these rules, when applied, during H1 2017, will mean that Tadawul will lead the region in being the first to introduce market instruments and processes that not only increase market liquidity, but also add to institutional confidence and investor choice.
While these latest set of rules/amendments form a part of a longstanding plan to further open up Tadawul, they have been given added impetus as a result of the broader reforms set out by the Saudi Vision 2030 plan, said the report.
One strand of the CMA’s recent set of amendments aim to loosen rules for the participation previously set out on QFIs.
These include:
l QFIs wanting to participate in Tadawul will have to have at least $1 billion assets under management (AUM) (previously $5 billion) and have been operational for a minimum of 5 years.
l Each QFI (including affiliates) can only hold a maximum of 10 percent (previously 5 percent) of issued shares of any one listed company.
l The elimination of the clause relating to QFIs together only owning a maximum of 20 percent of issued shares of any one listed company.
l All foreign investors (including residents and non-residents, swaps and QFIs) will still only be able to have a combined ceiling of 49 percent ownership of issued shares, in any one listed company.
