Saudi Arabia Lowers Barriers to Stock Market Investment Again as Reforms Progress

Saudi Arabia announced that it will lower the required minimum assets under management for qualified foreign institutions starting this month, according to Bloomberg and a statement by the Saudi Capital Markets Authority (CMA).

The announcement said the CMA will also allow foreigners to own up to 49 percent of listed securities on Saudi Arabia’s stock market.

The move comes as Saudi Arabia’s Capital Markets Authority (CMA) seeks to increase foreign activity in its stock market and plans what could be the world’s biggest initial public offering.

In 2016, the CMA lowered the minimum value of the assets under management to be $1 billion, an 80% reduction from the previous minimum of $5 billion. But according to Bloomberg, the CMA lowered that amount again to 1.875 billion riyals ($500 million). The reduction is designed to allow smaller funds with less under management to invest in the market.

“The cumulative impact of these measures will be a more efficient, liquid and secure market for investors and intermediaries that is further aligned to international best practices,” said Khalid Al-Hussan, Chief Executive Officer of Tadawul. “This next generation of market improvements builds on and augments the reforms already successfully implemented by Tadawul in 2017 to improve market function, protect investors and further consolidate Tadawul’s position as the leading market in the region and a global investment destination. These measures and reforms are creating a more attractive investment climate for domestic and international investors alike and have attracted more than 100 major financial institutions to open accounts in the Kingdom.”

The announcement of changes comes as the Al-Hussan reportedly said the exchange was prepared for the sale of Saudi Aramco on the exchange, “regardless of the structure that the company decides to use for the listing,” according to a separate Bloomberg story.

Tadawul will be the home exchange for Aramco, and, if there is another exchange, the decision will be coming from the issuer in due course,” Al Hussan said. The bourse is “taking all measures to ensure Aramco comes successfully to the market,” he said, via Bloomberg.

The Saudi Stock Market rose 3 percent month-on-month in December, the second highest monthly rise in 2017.