Saudi Arabia Opens Capital Market to Global Investors

Saudi Arabia loosens investing restrictions whereby it can expand foreign involvement to enhance liquidity and confidence in the market.

The Saudi Arabian government has publicly committed to opening their capital market to all foreign investors as early as February 1, which is a significant regulatory advance towards bringing in international flows of investment. The capital markets authority affirmed the reform by stating that it has eliminated the Qualified Foreign Investor program that was used to restrict access to special institutions.

With the new regulation, investors across the world would have the opportunity to invest directly in the Saudi capital market, which would drive liquidity as well as transparency. The regulator explained that the change will help in the strategy of diversification of the entire economy of the kingdom since it will minimize the dependence on the oil revenues.

Saudi Arabia has already undertaken measures to bring more foreign involvement by initiating the exchange-traded funds with its Japanese and Hong Kong partners. There were also regulations that foreigners were able to purchase shares of the listed companies that owned real estate in Mecca and Medina, but not the direct ownership of land.

Nevertheless, JP Morgan analysts claimed that the effect might not be immediate and that most of the large institutions already have access to markets. They pointed out that the possible relaxation of foreign ownership restrictions can provide a more significant impetus to the capital market later in the year.

Saudi stocks had previously surged on the hope of easing of the regulation, but the benchmark TASI index is also not spared since it fell last year.