SAMA, cooperated and facilitated the requirements of opening bank accounts
-Coordinating with Tadawul to investment portfolios and the cyclical announcements on ownership percentages
- A number of experts and analysts expect that foreign investors enter the market gradually
Since the issuance of the Council of Ministers’ Resolution No. (388) dated 24/9/1435H corresponding to 21/7/2014 to open the market for the Qualified foreign financial institutions to buy and sell listed shares in the Saudi Stock Exchange, the Capital Market Authority worked on several steps to prepare the Rules for Qualified Foreign Financial Institutions Investment in Listed Shares until the final version is published today. It is important to note that these rules shall be effective starting from 14 Sha’ban 1436H corresponding to June 1st, 2015. According to the rules, the market will be open to the QFIs on 28 Sha’ban 1436H corresponding to June 15th, 2015.
Abdullah Al Kahtani, CMA’s spokesperson, said that one of the steps taken by CMA was the issuance of its Board resolution on 25/10/1435H corresponding to 21/8/2014, which included publishing the draft Rules for Qualified Foreign Financial Institutions Investment in Listed Shares on the CMA’s website. That is in accordance with clause (B) of Article (5) of the Capital Market Law. The draft rules were available for the public since August 212014 for 90 days.
During this period, CMA received over 500 comments on the Rules proposed by 33 domestic and international entities. The domestic entities are represented by governmental bodies and APs (local and branches of foreign brokerage firms), legal firms and individual investors. On the other hand, the foreign entities suggestions were from banks, brokerage firms and portfolio managers.
CMA prepared a list of all the countries that apply similar regulations and jurisdictions to CMA’s or accepted by it. This is based on the studies done in this area and based on CMA’s desire to focus on foreign financial institutions that have the expertise foreign markets. The list will be available at the Authorised Persons and it will be updated by CMA periodically.
In parallel with receiving the comments and observations, CMA held several internal and external meetings with relevant parties. It also worked on preparing the guide for the internal policies and procedures related to reviewing, registering and following up on the foreign investor’s requests and his clients’.
In addition, CMA coordinated with the Saudi Stock Exchange (Tadawul) in several aspects including: monitoring of investment restrictions, provide the necessary information on the percentage of foreign investors' ownership in every listed company through the company’s page on Tadawul’s website, the procedures for opening an account at the Depository Center for the QFIs and the approved QFI clients, and the procedures for exchanging the information related to the QFIs and their approved clients between CMA and Tadawul.
CMA’s spokesperson explained that CMA held several meetings with the representatives of the governmental entities to discuss related aspects. It coordinated with the Saudi Arabian Monetary Agency (SAMA) to facilitate opening bank accounts for the QFI and its approved clients. It was agreed, with SAMA and Tadwul, that the requirements to opening accounts with banks and depository center shall be combined and processed through the Authorised Persons (one-stop-shop)
The Capital Market Authority thanked the Ministry of Finance, the Saudi Arabian Monetary Agency, Ministry of Commerce and Industry, Saudi Arabian General Investment Authority (SAGIA), the Saudi Stock Exchange (Tadawul) and all the other entities for their full support to the project of allowing foreign financial institutions to buy and sell listed companies in the Saudi Stock Exchange and helping it to reach the execution phase.
CMA has started an awareness campaign since the announcement of the timetable for issuing the Rules for Qualified Foreign Financial Institutions Investment in Listed Shares, its execution date and the date for opening the market. It will continue this campaign that includes participating in conferences and forums to inform the public about the objectives of opening the market for foreign investment.
The Authority also launched a QFI page on its website that includes the Rules in both languages Arabic and English as well as a list of the frequently asked questions (FAQs). It also includes awareness flyers and visual content related to the matter. That is all in parallel with a social media campaign with awareness messages on all of CMA’s channels in Arabic and English including the objectives of opening the market and the articles of the Rules.
Several analysts and experts on the capital market expected that the entrance of foreign investors in the market through investing in listed companies would be gradual since some investors would wait until the market is included on the global indices . It is expected that the number of QFI investing in the Saudi market will increase after that.
Al Kahtani repeated what CMA said earlier that opening the Saudi stock market for foreign investment aims for several objectives. The most important of which are:
- Promote institutional investment through the entrance of specialized foreign investors in the Saudi Capital Market which would contribute in market stability and reduce volatility.
- Raise the level of research, studies and evaluation on listed companies and macro-economic issues. The CMA noticed an increase in research and reports.
- Enhance the market efficiency and motivate listed companies and the specialized investment companies improve the level of transparency, financial information disclosure and governance practices.
- Transfer the knowledge and expertise to the local investors and financial institutions as well as raising the level of professionalism of the market participants by attracting highly professional experts.
- Strengthening the Saudi Capital market’s position to become a leading market. In addition to increasing the opportunities of raising its rating to be classified as an emerging market under the global indices.
For more information, please visit the CMA website on the following link:
www.cma.org.sa