Saudi Capital Market Authority Targets 17% Foreign Ownership of Stocks by End-2024

The Capital Market Authority (CMA) aims to increase foreign ownership of the market value of Saudi stocks to 17% by the end of 2024, according to the 2023 Financial Sector Development Annual Report. The report states that foreign ownership stood at approximately 12.9% of the free shares in the financial market at the end of 2023. This effort aligns with the broader goals of the Financial Sector Development Program, a key component of Saudi Arabia’s Vision 2030.

In May 2023, the CMA approved new rules regulating foreign investment in securities, along with amended investment account instructions and revisions to the executive regulations of the Companies Law for listed joint-stock companies. These changes took effect upon publication. Adopting these rules, instructions, and a revised glossary was intended to streamline the regulations governing foreign investment in securities. By consolidating these provisions into a single regulatory document, the CMA aims to make it easier for foreign investors to navigate the Saudi financial market.

The recent amendments have eased the requirements for foreign investors, reducing the disclosure obligations and ongoing responsibilities to facilitate the entry of qualified foreign investors into the Saudi market. The changes also aimed to narrow the gap between the regulations imposed on qualified foreign investors and those applied to other investor categories in the Saudi market. Additionally, the amendments revised the qualification criteria for qualified foreign investors to invest in shares listed on the main market, eliminating the need for a qualification application and a qualified foreign investor evaluation agreement. Instead, the new rules rely on the investment account requirements established by the CMA to ensure that foreign investors meet the relevant qualification conditions.

The amendments also revised the conditions for non-resident foreign investment in listed securities through swap agreements, including the removal of the condition on the term of the agreement and the requirement to notify the CMA before concluding a swap agreement.

Furthermore, the changes introduced a new channel for foreign investment in securities listed on the main market by allowing foreign individuals and legal entities to invest through portfolios managed by financial market institutions.

The CMA expects these approved rules to enhance liquidity in the Saudi financial market, boost its attractiveness on a global scale, and support the transfer of knowledge and expertise to local financial institutions and investors. The annual report of the Financial Sector Development Program for 2023 highlights the CMA’s objectives, which include facilitating financing in the financial market by increasing the number of listings. In 2024, the CMA aims to list 24 companies and support new sectors by raising the proportion of micro and small enterprises to 45% of total listings. The CMA also seeks to increase the percentage of managed assets to 29.4% of GDP by the end of this year by enhancing the investment environment and fostering the growth of the asset management industry. Additionally, the CMA aims to raise foreign ownership to 17% of the total market value of shares by the end of 2024 and to develop and deepen the sukuk market, targeting a debt instruments market size of 22.1% of GDP by year-end.