Saudi Arabia's plans to open up its stock market will limit direct foreign ownership to investors with at least $5 billion under management and allow each to hold a maximum 5 percent of a stock's issued share capital, two industry sources said.
Saudi Arabia's Capital Market Authority (CMA) and Tadawul, the largest Arab bourse, have indicated to market participants the details of the proposed framework of foreign ownership.
Total direct ownership of each stock would not be allowed to exceed 20 percent of the issued share capital, a source familiar with the matter told Reuters.
Currently, foreigners have only very limited opportunities to invest through indirect ownership and exchange traded funds that track indexes. Under the new framework, total foreign investment in a listed firm, including swap notes, non-Gulf Arab foreigners and expatriates in Saudi Arabia, will not be allowed to exceed 49 percent, the source added.
"The market operator has highlighted some issues for foreign investor trading," the source said.
"The main problem is how the custody landscape will look like. Tadawul is proposing three custody models to facilitate it." The types of models are currently confidential. The source also said that there is still no indication of how much the fees or commissions for trading would be. Saudi Arabia has been considering a wider opening of its market for several years.
The chief executive of the kingdom's exchange, Abdullah al Suweilmy, told reporters earlier this week that it has yet to finalise a timeframe for when it would open up its market, but industry sources say it could happen as early as mid to late first quarter of 2012. CMA was not immediately available to comment when contacted by Reuters.