Saudi Arabia's stock market regulator proposed rules on Thursday for opening the $580 billion market to direct investment by foreign institutions, including a 10 percent cap on foreign ownership of the market's value. Among other draft rules, a single foreign investor could own no more than 5 percent of any listed firm, while all foreign institutions combined could own no more than 20 percent. The Capital Market Authority published the draft on its website.
The Saudi market is the biggest in the Arab world and one of the last major bourses to open up, so the reform is attracting massive foreign interest. Fund managers have estimated the market could draw $50 billion or more of new foreign money in coming years if it is included in global equity indexes. "A lot of foreign smart money will want to enter the Saudi market given that other markets might be reaching their upper limits going forward," said John Sfakianakis, a prominent Riyadh-based investment strategist.
He noted that the Saudi market was more liquid and diverse than markets in neighbouring Gulf states such as Dubai. Authorities in the world's biggest oil exporter, keen to use the stock market to diversify the economy beyond oil and create jobs, considered opening the market for years. But they held off, concerned about the risk of destabilising stock prices. Currently, foreigners other than residents of Saudi Arabia and citizens of neighbouring Gulf states can only invest in the market in indirect ways such as swaps and exchange-traded funds.