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Foreigners in Saudi Arabia can now own 10 percent of shares in a firm

Previously, each QFI together with its affiliates could only own a maximum of 5pc of the shares of any listed company

Published: Updated:

To improve the investment environment the Capital Market Authority (CMA) on Tuesday approved a number of amendments to its Qualified Foreign Institutions (QFI) scheme, which allows foreign institutions to buy stocks directly.

Now each foreign investor will be allowed to own a stake of under 10 percent of a single company, said the CMA in an announcement posted on its website.

Previously, each QFI together with its affiliates could only own a maximum of 5 percent of the shares of any listed company.

To qualify as a QFI, foreign institutions will now only need to have a minimum SR3.75 billion ($1 billion) of assets under management, rather than SR18.75 billion as required previously, the CMA said.

Furthermore, the CMA agreed to the inclusion of new foreign financial institutions, including sovereign wealth funds and university endowments.

All foreign investors jointly (whether resident or non-resident) can own no more than 49 percent of shares of any listed company on the market unless company’s bylaws or any other regulation provides for foreign ownership to be limited to a lower percentage.

The new rules and their effective date will be published by the end of the first half of 2017, it added.

In a separate statement, the stock exchange said it will amend its settlement cycle for share trading, bringing it in line with European markets.

The Capital Market Authority has approved plans to adopt a so-called T+2 settlement, allowing a two-day settlement period for equity trades.

The bourse currently uses a T+0 system, meaning same-day settlement.

Adjusting the cycle may help it get added to MSCI Inc.’s emerging-markets gauge, according to analysts.

“The CMA aims for these measures to provide greater stability to the overall capital market environment by applying international best practices, incentivizing investors in an environment that supports the national economy,” said the announcement.

This article was first published by the Saudi Gazette on My 4, 2016.