CMA prioritizes foreign investments, eyes more: Official

Fahad Mohammed Hamdan, CMA Deputy Assistant for Listed Companies & Investment Products

The Capital Market Authority (CMA) gives priority to foreign investments, in line with Vision 2030, Fahad Mohammed Hamdan, CMA Deputy Assistant for Listed Companies & Investment Products, told Argaam.

He added that the market regulator is paving the way to attract more foreign investments and hence it is keen to develop the rules for foreign investments in the capital market.

The rules aim to stimulate foreign investments, boost the attractiveness and efficiency of the capital market, as well as enhance its competitiveness locally and internationally, the official noted.

He added that the CMA recently approved the rules for foreign investments in securities, the amended investment accounts instructions, the amended implementing regulations of the companies law for listed joint stock companies and the glossary of defined terms used in the regulations and rules of the Capital Market Authority.

The adoption of these rules, instructions, and glossary of defined terms was to facilitate the requirements of foreign investors, gradually and systematically. This aimed to achieve a significant convergence between the requirements for opening investment accounts for foreign and local investors, as well as boost the access of foreign investors to Saudi stock market.

The market regulator also worked to add the foreign investors-related provisions in one regulatory document. It cancelled the requirements for submitting the qualification application, the evaluation agreement for qualified foreign investors, as well as the disclosure and continuing obligations to facilitate the access of qualified foreign investors to the Saudi stock market. 

The latest amendments include adding a new channel for foreign investments in companies listed on the main market through enabling foreign natural and legal persons to invest in these companies through investment portfolios managed by financial market institutions, Hamdan said.

He added that foreign investors can invest in the Saudi stock market through opening an investment account easily by communicating with any of the financial market institutions that have a dealing or custody license. Investors may also communicate with these institutions through the CMA website. 

The updates to the regulations issued by the CMA over the past years were reflected in the promotion of foreign investments. The CMA also issued in 2018 an update to the rules for qualified foreign financial institutions investment in listed securities. Thus, the number of foreign investors doubled, and they dominated more than 21% of daily trading at the end of the third quarter of 2023, compared to nearly 4% before the issuance of the rules. Their ownership value also soared 1,300% year-on-year to SAR 366 billion.

"The participation of foreign investors is not limited to the secondary market. The average contribution of foreign investors to the coverage of initial public offerings (IPOs) doubled to reach 200% of the value allocated for institutions from 2020 to 2022," Hamdan said, adding that this became a significant element in financing the local economy through the capital market.

The official stressed that easing foreign investment requirements will raise demand for upcoming IPOs and secondary offerings, contributing to reducing market volatility by diversifying the investor base globally with different types of behavior.

He pointed out that the issuance of rules regulating the investment of qualified foreign institutions in Saudi-listed securities, along with other similar steps, represents a development in the financial market system, contributed to the market inclusion in several emerging market indices such as MSCI and FTSE. It also increased the volume of foreign cash flows in the market, contributing to market liquidity growth.

Consequently, it enhances the representation of the financial market on emerging market indices and supports its transition to advanced markets.

He emphasized that Vision 2030 includes several ambitious and qualitative projects that have contributed to the transformation of the Kingdom in the social, economic, tourism, sports, aspects, etc. These projects have presented significant investment opportunities not only at the local and regional levels but also globally.

While the local market has been heavily reliant on contributions from local investors, it has recently started to attract foreign capital, contributing to Saudi Arabia's shift from a capital-exporting to a capital-importing country.

Hamdan affirmed that the CMA intends to enhance the attractiveness, efficiency, and regional and international competitiveness of the Saudi financial market. This involves ongoing efforts to develop the market, contributing to the realization of its strategic plan, making the Saudi capital market rank among the most important global markets. The CMA aims to be an advanced and attractive market for both local and foreign investment, enabling it to play a pivotal role in economic development and income source diversification.