Saudi Arabia is opening on of the world’s most-restricted stock markets to foreigners for the first time on Monday.
The move comes as the biggest economy in the middle East seeks to reduce its dependency on oil income, which about 90 percent government revenue, and kingdom burns through foreign reserves at a record pace.
Previously, only Saudi-based investors could buy stocks there. But by mid June, international firms will be able to buy stocks in the country exchange, All Share Index. This will likely enhance mutual funds and Exchange Trade Funds to add some Saudi stocks to their holidays, especially in enhancing market funds.
What’s the big emerging Market
Saudi Arabia is the richest and most powerful in Arab nation, with more Proven oil reserves than U.S. and Russia. The Saudi Arabia stock market is bigger than all the six nation Gulf Cooperation Council combined.
This week, all the foreign investors to buy Saudi stocks was through so-called participatory notes and exchange-traded fund. So can all foreign investors, invest in directly?
It depends on how much they invested and how long in this business. The Riyadh Based Capital Market Authority has restricted direct trading to institutional investors a minimum of about $5 billion in assets under management and at least should be minimum five year experience.
Foreigns and resident both are able to own as much as 49 percent of single stock. Holding in a single equity for one qualified foreign investor are capped at 5 percent and there’s a 20 percent ceiling for all QFI in any one stock. All qualified foreign investor holding won’t exceed 10 percent in whole market.
The Saudi Arabia market same breath as major emerging market countries like Brazil and India, Although it’s still classified as a frontier market currently.
The Saudi market is largely dominated by energy related companies and financial firms. The Index is up 11% so far the year.