Saudi Arabia’s stock exchange said it will cut the amount of assets foreigners must have under management to invest directly in the nation’s stocks, as it plans changes designed to allure more cash from overseas.
Qualified foreign institutions with a minimum of 3.75 billion riyals ($1 billion) under management will be able to acquire a license to invest in the Tadawul Stock Exchange directly, down from 18.75 billion riyals, according to a statement on the market regulator’s website. The effective date of the change will be published by the end of the first half of 2017. In a separate statement, the exchange said it will amend its settlement cycle for share trading, bringing it in line with European markets.
Saudi Arabia is seeking to open up one of the world’s most closed stock markets to more international participation. The $411 billion Tadawul started allowing limited foreign direct investment in June last year under rules that govern which foreign entities can invest and how much of each company and the market they can own.
The kingdom’s Capital Market Authority has approved plans to adopt a so-called T+2 settlement, allowing a two-day settlement period for equity trades. The bourse currently uses a T+0 system, meaning same-day settlement. Adjusting the cycle may help it get added to MSCI Inc.’s emerging-markets gauge, according to analysts.
The Riyadh-based regulator will also allow individual foreign investors to own not more than 10 percent of shares outstanding in a single company, up from 5 percent. Furthermore, it agreed to the inclusion of new foreign financial institutions, including sovereign wealth funds and university endowments.
Even though qualified foreign investors can currently collectively own as much as 10 percent of the market’s total value, they hold 0.97 percent, bourse data show.