LONDON: US fund manager Franklin Templeton is to allow foreign investors to invest directly in Saudi Arabian stocks for the first time, after announcing that its funds have been granted Qualified Foreign Investor status by market regulators.
The firm’s increased commitment to Saudi Arabian stocks follows the steady easing of restrictions on foreign investors by regulators in the Kingdom, as part of capital markets and economic reforms within the country.
The Saudi Capital Market Authority (CMA) announced measures to ease restrictions on foreign investment in the local stock market from this January and allowed eligible foreign enterprises to acquire a larger stake of up to 10 percent of any issuer’s shares, up from 5 percent.
“Bold fiscal reforms, including steps to reduce its reliance on oil, will put the Kingdom’s economy on more sustainable footing over the long-term,” said Bassel Khatoun, managing director, frontier and MENA, Franklin Templeton Emerging Markets Equity.
“At the same time, impressive capital-market reform is culminating in classification upgrades by key index providers. Finally, social reform continues unabated, leading to new investment opportunities across the economy. As a firm, we are excited to be part of these positive developments.”
Saud stocks are expected to be upgraded to emerging market status by index provider MSCI on Wednesday, following a similar upgrade by fellow index provider FTSE Russell at the end of March.
Around $3 billion in foreign flows has come into the market already in 2018, taking total foreign investment in local equities to around $9 billion.
Franklin Templeton forecasts such upgrades will attract additional foreign investment flows of around $35 billion. The upcoming IPO of Saudi Aramco, expected in the next year or so, will bring in $50 billion in foreign investment depending on valuation, the firm predicted.