Saudi Arabia opens stock market to foreign investors – 5 Key Points


Saudi Arabia’s stock market, valued at $585 billion, opened up to direct foreign investment for the first time Monday 15th June 2015, in the hope of an economic boost amid low global oil prices. Here are five key things to be known about this new market opportunity:

1. It’s big: Saudi Arabia has the largest stock market in the Middle East. With the added value also of its stock exchange listed companies which amounts to approximately $570 billion this makes it an even larger market than those of Russia and Mexico.

2. It performs well: As of 15th June Saudi Arabia’s All-Share index — dubbed TASI — has risen by 15% since the start of 2015, outperforming all main U.S. indexes.

3. There are many rules: Saudi Arabia has created many restrictions to filter through to only the largest of investors. Saudi Arabia requires that foreign investors register with its Capital Market Authority (CMA) before they can begin investing. They must reach a “Qualified Foreign Investor” status.

Only financial institutions such as banks, brokerage houses and fund managers will be considered. They must each also have over $5 billion in assets under management and have been in operation for five or more years.

Other regulations are that qualified foreign investors cannot own more than 5 percent of the shares of any company. These investors as a whole cannot own more than 20 percent of shares in the roughly 165 listed companies.

4. Unqualified Investors can still invest: Those who can’t register as “Qualified Foreign Investors” can still invest through a swap agreement program, however they will not have the mandatory shareholder rights and will also not be granted voting rights.

5. Why now?:

There are differing views and statements as to why this change has been implemented.

Moustafa Zantout, a spokesman for Kuwaiti investment company Global Investment House, believes the ultimate goal is to convince index provider MSCI to include Saudi Arabia in its widely tracked emerging market index. MSCI benchmarks are used to help investors access a wide variety of global markets and direct billions of dollars into international stock exchanges.

In May, Tadawul CEO Adel al-Ghamdi, whilst at an economic conference in Riyadh said:

“The point of the framework was never about increasing foreign investment flow into the kingdom. It was always about trying to bring foreign investors to enhance our practices and our market infrastructure,” al-Ghamdi said.

At Gladstone Morgan we cover all aspects of your Financial Planning and offer independent and impartial advice. Contact Dino Zavagno or a member of his team about reviewing your existing Financial Planning.

Disclaimer: All content provided on this page are for informational purposes only. Gladstone Morgan Limited makes no representations as to the accuracy or completeness of any information on this page or found by following any link on this page. Gladstone Morgan Limited will not be liable for any errors or omissions in this information nor for the availability of this information. Gladstone Morgan Limited will not be liable for any losses, injuries, or damages from the display or use of this information. This policy is subject to change at any time.

It should be noted the services available from Gladstone Morgan Limited will vary from country to country. Nothing in the comments above should be taken as offering investment advice or making an offer of any kind with regard to financial products or services. It is therefore important to reinforce that all comments above are designed to be general in nature and should not be relied upon for considering investment decisions without talking to licensed advisers in the country you reside or where your assets may located. Gladstone Morgan Ltd is not SFC authorized. Gladstone Morgan Ltd in Hong Kong is licensed with the Hong Kong Confederation of Insurance Brokers.