Saudi Arabia on Target to Open Tadawul to Foreign Investors with Issuance of Rules for Qfi's

06 May 2015 - The Saudi Capital Markets Authority (CMA) has finally formally issued its eagerly anticipated regulations for Qualified Foreign Investors (QFI's) to invest in the Tadawul All Share Index.

The new regulations take effect on 01 June 2015 and will mean that QFI's can invest directly for the first time in the largest regional stock exchange estimated to be worth in the region of US$550 billion.

Key features of the new regulations are consistent with the draft rules issued for consultation at the end of last year, which include:

  • QFIs must make an application to an authorised assessing person (AAP) which will be appointed by the CMA
  • QFIs must be either a bank, brokerage or security firm; a fund manager or an insurance company
  • QFIs must have at least five years' experience of managing fund of no less than US $5 billion, which can be reduced to US$3 billion by the CMA at its discretion
  • QFIs and QFI clients are limited to a cap of 10% of the total market value of the Tadawul
  • Foreign investors are not permitted to own more than 49% of the shares of any listed issuer

Commenting on the impact of the changes, Imran Mufti, finance partner in Hogan Lovells, Saudi Arabia, said:

"It is very pleasing to the market and the wider global business community that the CMA have delivered on their promise to issue these regulations and that there were no delays.

"Time will only tell whether this will lead to a flurry of QFI applications, and consequently foreign investment, in Tadawul.  Investors should receive the announcement with optimism as it is a clear indication of the new Government's commitment to opening up the market to foreign investment.

"It is unlikely that once approved as QFI's that fund managers will rush into ploughing billions of dollars into the Tadawul. Investors are likely to be more discerning in light of the impact of the geopolitical factors and oil price volatility".

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