Saudi expedites plans to relax foreign investment restrictions
Saudi Arabia’s market regulator is quickening the pace on easing restrictions for foreign investors, with measures set to be introduced by the end of this year instead of next, it has been reported.
The Capital Market Authority (CMA) announced plans in May to allow foreign investors to own larger stakes in listed companies in Saudi Arabia.
It said it hoped to implement the changes along with other regulations by mid-2017, and launched a public consultation on the plans.
The consultation concluded last week, but CMA chairman Mohammed Al Jadaan told the Wall Street Journal in an interview that the new rules could be implemented by as early as the end of September.
The CMA is gearing up for the planned listing of 5 percent of oil giant Saudi Aramco on global stock exchanges, including the Tadawul in Riyadh.
The listing would be huge – it is estimated that Aramco is worth between $2 trillion and $3 trillion, which means the initial public offering (IPO) could raise between $100 billion to $150 billion.
Al Jadaan reportedly told WSJ that the Tadawul lacked the liquidity at present to be able to absorb the huge IPO, so needed to prepare for an influx of foreign investment.
He was quoted as saying: “It’s going to be a huge amount and it’s unlikely that local demand will cover it, so you’ll be looking for international cover. And you want to make sure that the international demand process is prepared.”
The regulatory body and the stock market are holding talks with Aramco and have set up a task force to address investor concerns, according to WSJ.
“We want to make sure the whole ecosystem is prepared for it,” Al Jadaan added. “We will be thrilled to have Aramco come to the market. It’s something we would proud of, but we also want to make sure that we are ready.”
The other proposed regulatory changes include lowering the minimum value of assets foreign institutions are required to manage, in order to qualify to invest in the Saudi stock market.
The exchange also intends to move away from a same-day trading settlement system to clearing trades within foreign investors’ preferred time period of two working days.
Al Jadaan told the newspaper: “Possibly we will implement it well ahead of what we said, in June 2017. It might be in this year…
“To make sure that when it comes to that day we will be prepared, some of the changes will be phased in.”
Source: Arabian Business