Chairman of the Capital Market Authority Mohammed Aljadaan explained that there are several objectives that the Kingdom of Saudi Arabia aims to achieve by allowing qualified foreign financial institutions to invest in listed shares.
Aljadaan said the Kingdom, which is a member of the Group of Twenty (G20) and a member of The International Organization of Securities Commissions (IOSCO), was the last country of the major economies of the world that allowed foreign investors’ direct access to its capital market. By that, the Saudi capital market would be a part of the major global market. Aljadaan added that CMA since its establishment aims to develop the Saudi capital market, and that the decision to allow foreign investors to invest directly in the market would achieve this through several objectives on the short and long term. Those objectives include adding the expertise of the specialized foreign investors to the local market and promote CMA’s efforts to increase institutional investments in the market according to its strategy for the period between 2015-2019. In addition, the specialized foreign investors represented in the Qualified Financial Institutions (QFIs) are expected to contribute in reducing high volatility in prices.
He said the QFIs will also enhance the market efficiency and motivate listed companies to improve the levels of transparency, disclosure and governance practices. Moreover, it is expected that the level of studies, research and evaluation done on the market in general and on the listed companies in particular would be higher which would provide more accurate information and more fair assessments.
As for the Authorised Persons (financial institutions authorized by CMA), he said this step would help their businesses to grow by serving such new category of clients. All that will be accompanied by an increase in the awareness activities and conferences that specialize in financial investment in the Saudi market in addition to raising awareness generally on the capital market and investing in it.
He emphasized that opening the market for foreign investment in accordance with the regulating rules, does not focus on bringing capital or liquidity to the market as the local market does not suffer from lack of liquidity, and the average trading rate is considered within the acceptable global levels..
The chairman also stressed that the rules prepared by the Authority took into account other related regulations in the Kingdom. In addition, the opinions of the public and the experts who participated with their suggestions during the 90 days period where the CMA published the draft rules on its website from the August 21st, 2014 to November 20th, 2014, were taken into account.
It is important to note that CMA will publish the Rules for Qualified Foreign Financial Institutions Investment in Listed Shares on May 4th, 2015. It only allows large and experienced foreign financial institutions from countries with developed regulations and jurisdictions to enter the market. These rules shall be effective starting from June 1st, 2015 and the QFIs will be allowed to invest in listed shares starting from June 15th, 2015.
