|27 June, 2019

Saudi Arabia removes ownership limit for foreign strategic investors

A strategic investor buying a stake in a listed company will need to maintain the holding for at least two years, according to the CMA

Traders monitor stock prices on screens at the Saudi Investment Bank in Riyadh. Image used for illustrative purpose

Traders monitor stock prices on screens at the Saudi Investment Bank in Riyadh. Image used for illustrative purpose

REUTERS/Faisal AlNasser

Saudi Arabia's Capital Market Authority (CMA) has removed a limit on ownership for foreign strategic investors in shares of listed companies to foster more investments into its stock markets.

According to a statement from the CMA on Wednesday, there are no maximum or minimum limits on the ownership of listed companies for foreign strategic investors. The limit was previously 49 percent.

The market watchdog on its website said, the move is "in continuance to the Capital Market Authority's role to regulate and develop the capital market, and in its efforts to enhance the market’s efficiency and attractiveness and to expand the institutional investments base.”

A strategic investor buying a stake in a listed company will need to maintain the holding for at least two years, according to the CMA.

In a document with instructions regarding ownership in listed companies, CMA defines a foreign strategic investor as a foreign legal entity that aims to own a strategic shareholding in listed companies.

A strategic shareholding is further explained as the direct ownership percentage in the listed company's shares, and through which the aim is to contribute in promoting the financial or operational performance of the listed company.

Though CMA has removed the cap, limits by other regulators or a company’s own rules still apply, Bloomberg reported on Wednesday.

Saudi Arabia in its efforts to move out of an oil-economy and attract more investors globally to fund its development and infrastructure programmes, introduced many capital markets reforms past two years. As a result, index compilers have started endorsing the market.

On May 14, index provider MSCI added Saudi Arabia to its emerging-markets indexes. MSCI is the world’s biggest index compiler and its emerging-markets index is the most important for the asset class, with as much as $1.8 trillion in assets benchmarked to it as of June 2018.

UK-based Index compiler FTSE Russell upgraded Saudi Arabia’s status, from unclassified to secondary emerging market.

According to Reuters, Tadawul All-Share Index.Tasi is up 11 percent year-to-date.

(Writing by Seban Scaria; editing by Mily Chakrabarty)

(seban.scaria@refinitiv.com)

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© ZAWYA 2019

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