Saudi Arabia plans to further open up its stock market to foreign investors later this year as it seeks to become an international capital markets hub, Mohammed Abdullah Elkuwaiz, chairman of the Capital Market Authority (CMA) told Reuters on Friday.
Qualified foreign institutions (QFIs) were allowed to begin investing directly in Saudi stocks in 2015 and qualification requirements were eased late last year.
“We are likely to follow up with a version three (of the QFI program) and maybe a version four shortly thereafter by continuing to deregulate foreign investor access,” said Elkuwaiz, who became chairman of the body in August.
“Our expectation is we continue the same cycle. Thereabouts every year we would expect a re-release.”
As part of Vision 2030, an ambitious reform plan to diversify the Saudi economy beyond oil, Saudi Arabia is trying to develop, open up and grow its capital markets.
The CMA has been revising rules to help the Saudi market enter international equity indexes, which would bring more foreign money.
New listing rules to be announced in the next month or two alongside new M&A rules will have an emphasis on driving debt issuance.
“It is part of the re-review of the issuing and listing rules of Saudi was both oriented toward making it easier to issue and list securities in general and specifically to make it much easier to issue and list debt securities,” he said.
Elkuwaiz said lot of the disclosure and offering requirements will be waived for publicly-traded companies which have already gone through much of the process for their equity listings.
Regulation on the creation of special purpose entities (SPE) to house assets for debt will allow the CMA to approve and license SPEs to stimulate debt activity.
New listings
Around five or six companies from a range of sectors have pending applications with the CMA to join the main equity market and the NOMU market, a parallel market Saudi Arabia recently launched for small and medium enterprises, Elkuwaiz said, and there are 25-30 mandates with banks for listings further down the line, all from Saudi companies.
“We are having very early discussions with non Saudi issuers who would like to tap into Saudi investors,” Elkuwaiz said.
He said it was reasonable to expect foreign company listings from mid-2018.
Elkuwaiz said Riyadh’s Tadawul exchange was ready for any size of listing of state oil giant Saudi Aramco , and the only outstanding issue is the alignment of the exchange with any others where Aramco securities may be listed.
Saudi authorities aim to list around 5 percent of Aramco by the end of 2018 on both the Tadawul and one or more international markets, with London, New York and Hong Kong in the running.
The initial public offering (IPO) is the centerpiece of the Vision 2030, championed by Saudi Crown Prince Mohammad bin Salman who is expected to take the final decision about Aramco’s listing venue.
“The only missing piece is if there is a decision to have a dual listing and if the market for that dual listing is identified and the structure of that listing is identified, there may be some additional incremental work that’s needed,” he said.
“That’s the only missing piece.”