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.


Saudi Aramco sets IPO share price between 30-32 riyals

Updated 50 min 22 sec ago

Saudi Aramco sets IPO share price between 30-32 riyals

  • Saudi Aramco intends to buy $1 billion worth of shares for employee

DUBAI: Saudi Aramco’s multibillion-dollar initial public offering (IPO), probably the biggest in history, shifted to full gear as its share price was announced and subscription to the world’s biggest oil company commenced on Sunday.

Saudi Aramco set an indicative share price between 30 and 32 riyals for the 1.5 percent of its oustanding shares – or about 3 billion shares of its 20 billion regular shares – that it would offer for the domestic part of its public offering. The blockbuster IPO could be worth least $24 billion, and values the state-owned oil giant at up to $1.71 trillion.

The offering – or book-building – period for institutional subscribers, which started today, closes on December 4 while the retail offering for individual investors will begin on November 21 and will end on November 28. Individual investors will subscribe based on a price of 32 riyals, the top end of the price range, the company noted in a document.

The final pricing for the Aramco shares would be announced on December 5, and Saudi Tadawul  – the Kingdom’s stock exchange – would make an announcement when initial trading day would be, the company added.

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For more of our coverage of the Aramco IPO, click here.

To view key Aramco IPO documents, click here.

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Samba Capital & Investment Management Company has been designated as issue manager while National Commercial Bank, Saudi British Bank, Samba Financial Group, Saudi Investment Bank, Alawwal Bank, Arab National Bank, Albilad Bank, Aljazira Bank, Riyad Bank, Al Rajhi Bank, Alinma Bank, Banque Saudi Fransi and Gulf International Bank were named as receiving banks.

If there are applications for more than the 0.5 percent on offer — amounting to 1 billion shares — allocations to private investors will be scaled back proportionate to demand; if there are fewer applications than the 0.5 percent when all maximum applications are satisfied, private investors can have the over-payment refunded either in cash via the receiving banks or in the form of extra shares in Aramco.

There is an incentive mechanism in the IPO whereby Saudi investors will receive a bonus one-for-ten allocation of shares, up to a maximum of 100 shares, if they do not sell shares in the market for a period of six months after dealings begin in December, at a date still to be determined.

Saudi Aramco also intends to buy $1 billion worth of shares for employees under a plan to incentivize executives and staff members alongside the IPO next month.

The plan — which was disclosed in the IPO prospectus — will involve Aramco buying the shares from the government and making them available for employees under special terms.