Saudi Arabia eases market entry conditions for qualified investors

Saudi Arabia’s Capital Market Authority will lower the minimum assets under management requirement for qualified foreign institutions (QFIs) and allow foreign investors to own up to 49 percent of listed securities, as part of a move to ease rules governing QFI program.

The new rules will take effect as of Jan. 23, the regulator said on Tuesday. They will make it easier for foreign financial institutions and their managed funds and subsidiaries to enter the market,.

New amendments include:

- Eliminating the requirement for CMA's review and approval of QFIs' qualification.

- Lowering the assets under management or custody (AUM) requirement for QFIs from $1 billion to $500 million.

- Qualifying subsidiaries of QFIs or foreign portfolio managers and their managed funds without the need to submit separate applications.

- Easing some of the continuous requirements on QFIs.

CMA said on its website that investments of QFIs will be subject to the following limitations:

- A single QFI can own up to 10 percent stake into the shares of any single listed company or the convertible debt instrument thereof.

- All foreign investors (resident and non-resident) could own up to 49 percent share of the stock of any listed company, or convertible debt instruments thereof.

CMA executed key market reforms last year, as part of plans to attract foreign investors to the local stock market and align with international standards.

The reforms include:

- Allowing foreign investors access to NOMU parallel market

- Introducing T+2 settlement

- Enabling securities borrowing and lending and short selling

- Adopting new corporate governance rules

- Adopting International Financial Reporting Standards (IFRS) for Tadawul-listed companies

- Enabling foreign subscription to domestic initial public offerings (IPOs)

- Adopting updated regulations governing mergers and acquisitions (M&A)