Saudi Arabia has taken a historic decision to liberalize its economy and promote foreign investment. Now it has become easier for foreign investors to invest in the Saudi stock market than before. The country’s Capital Market Authority has greatly relaxed the rules of foreign investment and abolished the old and strict restrictions, due to which the doors of the Arab’s largest economy have been completely opened for investors from all over the world.
The mandatory requirement of $500 million assets under management (AUM) for foreign investors has now been completely removed.
Earlier, a strict rule was applicable for foreign financial institutions (Qualified Foreign Investors) wishing to invest in the Saudi stock market. According to this rule, it was mandatory for the investing institution to have at least $500 million under management (assets under management or AUM). Due to this heavy condition, many small and medium-sized foreign fund houses and investors were not able to enter the Saudi market even if they wanted to. Now with the removal of this condition, a large section of investors will be able to directly buy shares of Saudi companies and ensure their participation in the market.
This is a strong step towards transforming the economy from oil to a financial center under Saudi Arabia’s ‘Vision 2030’.
This change is considered an important part of Saudi Arabia’s ambitious ‘Vision 2030’. The government aims to reduce the country’s economy’s dependence on oil revenues and make the financial sector more strong and modern. This major relaxation in rules is expected to increase the inflow of foreign capital into the Saudi Stock Market (Tadawul). Analysts believe that this step will not only increase liquidity (cash flow) in the market, but will also improve the reputation and valuation of Saudi companies at the international level.
The focus is on simplifying the registration process and making the market more attractive for global investors.
Along with removing the financial condition, the process of registration and entry for foreign investors is also being simplified. After this decision, now more number of international fund houses, asset managers and portfolio managers will be able to buy stake in big companies of Saudi Arabia. The move will elevate Saudi Arabia’s stock market further into the ‘Emerging Markets’ category and establish it as a major hub on the global investment map.
