Saudi Arabia Announces Plans to Open Stock Market to Foreign Investors
As of 2015, Saudi Arabia’s stock market will open up to foreign investors. As the largest economy in the Middle East, Saudi Arabia has a lot to offer. Not surprisingly, though, it’s moving forward cautiously, with many major limitations in place for foreign investors who wish to participate.
The stock exchange, worth $530 million, will be one of the last remaining stock markets in the entire world to open itself to foreign investment. Saudi Arabia has been able to stay an exception in part thanks to the strength of its oil industry, which has helped propel the nation’s economy forward for many years. China is another exception, and Saudi Arabia is the second-largest economy behind China to be closed off from outside investment.
“Incremental steps make good sense for Saudi Arabia as they move toward a fully-open market,” said Beth Kurth, President, the Corporate Forum. “Just as individual investors who are new to the market should learn the ins and outs, so too should a country that is opening a market opening to new investors.”
Since 2008, foreign investors have been able to indirectly play with the kingdom’s market through swapping. However, this is a cumbersome route for exchange, and many institutions are pleased that the market will be opening more fully so as to facilitate simplified transactions that are less mired in red tape.
“The market will be open to eligible foreign financial institutions to invest in listed shares during the first half of 2015, with God’s permission,” promised the Capital Market Authority in a released statement earlier this week. Among the restrictions will be that no financial institution can own more than 5% of a Saudi business, and overall, foreign investment can’t account for more than 20% of total stock market ownership. Investment firms will also need licenses, and will have individual quotas.
“As the largest equity market in the Middle East and North Africa, this will certainly put the region back on international investors’ radar and is likely to be transformative for regional equities,” predicts Bassel Khatoun in an interview with The Wall Street Journal. Khatoun works with Franklin Templeton Investments. The International Monetary Fund has said that it expects Saudi Arabia’s economy to grow by about 4.6% throughout the rest of 2014.