Saudi finalises rules for foreign opening of equity markets
Saudi Arabia’s capital markets regulator said on Monday it has finalised rules ahead of the opening up of its $550 billion (Dh2 trillion) equity markets — equal to the size of Russia — for foreigners, reports Gulf News.
Institutional investors with US$5 billion of assets under management will be allowed to invest directly in the stock markets with a discretion of the regulator to cut it to US$3 billion, the Capital Market Authority said in a statement posted on its website.
“This (final regulations) is quite a bit of progress and with this we are one step closer to the deadline of June 15, when foreign investors would have access to market,” Muhammad Shabbir, head of equity funds & portfolios at Rasmala Investment Bank, which runs a Saudi-based fund for regional investors, told Gulf News.
The foreign investors will be levied five per cent tax on dividends of listed companies. A single investor cannot own more than five per cent stake in a company, while foreign investors combined cannot own more than 10 per cent in stock market value.
Foreign investors combined cannot own more than 20 per cent in a company.
The rules will be effective from June 1, and foreign investors will be allowed from June 15, the regulator had said in mid-April.
Saudi Arabia, which contributes to 50 per cent of the GDP (gross domestic product) of Middle East and North Africa (Mena), and 50 per cent of market capitalisation of the region, had announced in July last year of such a move saying it would help them in diversifying the economy and thereby create more jobs.
Before this, foreigners had access to Saudi markets through swaps and exchange traded funds.
Best performer:
“Market has already rallied since the beginning of the year, so the growth keeping in view the earnings is not a lot. But this opening up would keep the sentiment alive,” Shabbir said.
Saudi’s Tadawul, which has gained more than 15 per cent so far in the year, is the best performing market in the Gulf region. On Monday, the Tadawul index hits its highest level in six months.
“Once the market opens, that doesn’t mean that money would come immediately or money would stay there. It will start coming and that would be positive for the market,” said Shabbir, “immediately, banking and petrochemical stocks, which are not liked by the local investors, would be picked up by foreigners.”
Foreigners will be able to own stakes in Saudi Basic Industries, the world’s biggest petrochemicals manufacturers, and Saudi Telecom along with National Commercial Bank.
MSCI eyed:
Saudi Arabia may be added to MSCI Inc.’s emerging markets index by 2017 at the earliest, accounting for about four per cent of the index.
“It will have a higher weightage in the MSCI index, which is close to the weightage of Russia and Mexico,” Shabbir said.
Currently, UAE and Qatar index was upgraded to an emerging market in May last year.
