CMA to reduce foreign investment restrictions by the end of year

Mohammed Aljadaan
Updated 31 July 2016

CMA to reduce foreign investment restrictions by the end of year

JEDDAH: Capital Market Authority (CMA) Chairman Mohammed Aljadaan has indicated the possibility of introducing measures and controls to reduce restrictions on foreign investments in the stock market before the end of the current year, or by mid-next year at the latest.
In an interview with The Wall Street Journal recently, Aljadaan said the new rules will likely be announced by the end of September, after the public consultation on the proposed changes came to an end last week. Rules include reducing the minimum value of assets that foreign companies are required to manage in order to qualify for investment in the stock market in the Kingdom, as well as shift from same-day trading to a two-day training system.
According to statistics, the share of foreign investors in the market is currently around SR1.6 trillion, or about only 1 percent. The amendments aim to keep up needs of foreign investors and global markets in line with the Kingdom’s efforts to join the index of emerging markets by mid next year.
Weeks ago, the CMA agreed to amend the registration of foreign financial institutions and qualifying conditions, and adjust the length of time for the settlement of securities transactions from T+0 to T+2.
The authority also agreed to activate securities lending and lower the required value of assets of foreign institutions to be eligible to invest in the Saudi stock market (Tadawul) from $5 billion to $1 million.
The authority also agreed to increase the categories of foreign financial institutions eligible to invest to include government funds and university endowments that agree to register with the authority.
Qualified foreign institutions will be permitted to own larger shares provided they are not up to 10 percent of the shares of any source for the individual investor. Foreign investors, including residents and non-residents, will still not be able to own more than 49 percent of the shares of any source listed on the market.

Indian property slump leaves beleaguered banks exposed

Updated 13 min 37 sec ago

Indian property slump leaves beleaguered banks exposed

  • While the Indian banking system could be hit by billions of dollars of additional soured debt, the cash crunch in the housing market has levied a toll in human misery

MUMBAI: India might have thought the worst of a bad loans crisis was past, but a severe cash crunch in the real estate industry could augur fresh strife for its banks. A slump in the residential property market is leaving many builders struggling to repay loans to shadow lenders — housing finance firms outside the regular banking sector that account for over half of the loans to developers.

With about $10 billion of development loans coming up for repayment in the first half of 2020, according to Fitch Rating’s Indian division, the fallout could spread to mainstream banks that have lent money to the shadow lenders or invested in their bonds.

Indian financial authorities, including the central bank and government, have said this year that the banking sector’s bad loans — totaling more than $150 billion — are on the decline for the first time in four years after ballooning during a debt crisis. But the number of property developers falling into bankruptcy has doubled during the past nine months, piling pressure on nonbanking finance companies (NBFCs), commonly known as shadow lenders.

Potential implosions of these NBFCs could expose banks, according to 12 banking and real estate sources.

A senior banking industry official, declining to be named due to the sensitivity of the matter, said banks would be affected by the property cash crunch in three ways: Their lending to NBFCs, their own direct exposure to developers and also individuals who do not repay mortgages.

“It will be a triple-whammy,” he said. While the Indian banking system could be hit by billions of dollars of additional soured debt, the cash crunch in the housing market has levied a toll in human misery.

Retired Squadron Leader Krishan Mitroo has paid 90 percent of the cost of his house in Noida, northern India, to developer Jaypee, and the property was supposed to be handed over five years ago. However, Jaypee was forced to delay the project and went into insolvency in 2017.

“The project has been stuck and there is no progress at all. Even the bankruptcy court has not been able to resolve the issue so far, it is just hanging in thin air,” Mitroo said. He did not say how much money he had paid, but properties in that project range from about $56,000 to $140,000.

Several such projects are stuck across the country and buyers are waiting for new developers to take interest and complete them with the hope that their hard-earned money, which has been stuck for years, won’t be lost forever.