Saudi Arabia’s Stock Exchange, IPO Market, Warm to Foreign Investors

Foreign investors looking to get into the IPO market in Saudi Arabia may be facing fewer barriers in the future.

One of the Gulf’s biggest equity markets, Saudi Arabia, will be opening its arms to foreign investors looking to get into the initial public offering (IPO) market in the country starting in early 2017, according to a Capital Markets Authority (CMA) filing.

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The move will help foreign market participants gain market exposure in the Saudi Arabian stock market, following the approval of regulations by the CMA, one of the country’s paramount regulatory authorities. More specifically, the entity has garnered new access on book-building in IPOs, which includes qualified foreign investors.

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Starting from January 1, 2017, foreign investors and advisers are even eligible to ‘apply these instructions on any offering before that date’ with approval from the issuer, per the filing. The move is important for investors given the rather restrictive environment of the Saudi Arabian stock market, having carved out a niche as one of the most exclusive in the world – this has only been exacerbated after the fall of oil prices in recent years.

New Rules

Stock exchanges such as Tadawul also started allowing select foreign direct investment (FDI) last year under the pretext that entities and groups can invest – however beginning over the next few months these barriers may even begin to soften.

The recent tranche of outlined IPO rules are also part of an ongoing initiative to help open up Saudi Arabia’s stock market via market liberalization and to entice greater foreign investor participation.

Moreover, a series of regulations will be taking effect on September 4, 2016, that effectively trim the amount of assets foreigners must have under management to invest directly in the nation’s stocks to $1 billion from $5 billion. As such, the new mandate will also allow individual foreign investors to own not more than 10% of shares outstanding in a single company, up from 5%.

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