DUBAI Aug 19 Overseas investors in the Saudi
Arabian stock market will face restrictions including a 20
percent ceiling on combined foreign ownership of any listed
stock, a major Saudi newspaper reported on Tuesday.
The Capital Market Authority announced in late July that the
market, the Arab world's biggest bourse, would open to direct
investment by foreign institutions in the first half of next
year. Currently, foreigners are limited to indirect investment
through swaps and exchange-traded funds.
The CMA said it would publish draft regulations for the
reform in August, before a 90-day public consultation period.
The Asharq al-Awsat newspaper quoted unnamed sources on
Tuesday as saying the decision to open the market was based on
the principle that foreigners would not be allowed to own more
than 20 percent in total of the paid-up capital of any firm.
Also, "foreign funds will not be permitted to hold more than
10 percent of the market value of Saudi stocks," the newspaper
said without elaborating.
If foreigners are limited to owning only 10 percent of the
overall Saudi market, which has a capitalisation of about $580
billion, that could disappoint investors; foreign ownership of
some other major emerging markets around the world is
A CMA spokesman, contacted by telephone, said the rules were
still in the final consultation stage in the CMA's legal
department, and would be published in a few days for public
He said he could not comment on the accuracy or otherwise of
the Asharq al-Awsat story.
Foreign funds investing in Saudi Arabia would need to have
minimum assets of $1 billion, and individual or retail investors
would not be allowed to own shares in Saudi companies except
through these funds, the newspaper said.
Also, foreign funds would not be allowed to own shares in
certain real estate developers with operations in the holy
cities of Mecca and Medina, to ensure that non-Muslim investors
did not own assets there.
Such companies include Makkah Construction and Development
Co, Taiba Holding and Jabal Omar
Development Co, the newspaper said.
The foreign ownership limits could reduce Saudi Arabia's
weighting in major international equity indexes compiled by
companies such as MSCI, if the index compilers choose to include
the country after foreign investors are allowed in.
When Qatar and the United Arab Emirates were added to MSCI's
emerging market index in May this year, their ceilings on
combined foreign ownership - in many cases, around 20 percent or
higher - caused MSCI to restrict their weightings.
(Reporting by Azza al Arabi; Additional reporting by Angus
McDowall in Riyadh; Writing by Andrew Torchia)