Post by : Mumtaaz
Qadiri
Photo: Reuters
Saudi Arabia is opening the doors of its financial markets to a specific category of foreign investors. The Capital Market Authority (CMA) has approved new rules that will allow individual foreign investors who are residents in any of the Gulf Cooperation Council (GCC) countries to directly invest in shares listed on the Saudi Exchange's main market. This marks a major policy shift in how international investors can access the Tadawul All Share Index (TASI), which includes top Saudi companies like Saudi Aramco.
Key Change in Investment Policy
Previously, international investors had limited options when it came to participating in the Saudi stock market. Most had to rely on indirect methods such as swap agreements or enter through capital market institutions. These pathways allowed them to benefit from the market’s growth but without the ability to manage investments independently. The recent amendment now permits a direct investment channel for foreign individuals living in GCC nations such as the UAE, Bahrain, Qatar, Oman, and Kuwait.
Inclusion of Former GCC Residents
The CMA has not only allowed current GCC residents but has also extended this benefit to individual foreign investors who once lived in Saudi Arabia or another GCC country. If they had opened an investment account during their time in the region, they will now be allowed to continue using that account even after returning to their home country. This decision ensures continuity in investments and supports ongoing participation in Saudi’s financial growth.
What Is the Tadawul All Share Index?
The Tadawul All Share Index (TASI) is the main benchmark index of the Saudi Exchange. It tracks the performance of all companies listed in the main market and reflects the health and direction of Saudi’s financial market. Companies from key sectors such as oil, energy, finance, manufacturing, and real estate are part of this index. Saudi Aramco, the world’s largest oil exporter, is one of the most prominent companies listed under TASI.
Stock Market Growth and Global Recognition
The Saudi Exchange, operated by the Saudi Tadawul Group, is now one of the largest stock markets in the world. With a market capitalization of USD 2.87 trillion as of April 2024, and over 422 listed securities, it ranks third among the largest emerging markets and is a member of the World Federation of Exchanges. This positions the Tadawul as a key financial hub, not only for the MENA region but globally.
Ease of Access for GCC Nationals
For the first time, GCC nationals and residents can now invest directly in the Saudi main stock market. Earlier, their participation was limited to the debt and derivatives markets. They could only invest in the main equity market via intermediaries through swap deals, and even then, the actual investment decisions were made by financial institutions on their behalf. The updated rule now gives these investors full control over their investments.
Simplified Process for Opening Investment Accounts
The CMA’s latest amendments have also simplified the process for opening and operating investment accounts. The new structure eliminates unnecessary bureaucracy and gives more power to the individual investor. While regulatory checks remain in place, the rules now allow quicker and easier access to account registration and management for eligible individuals.
Encouraging Long-Term Regional Investment
By allowing foreign individuals based in the GCC to invest in local Saudi shares, the Kingdom is expecting an increase in long-term capital flow. It aligns with broader national goals under Vision 2030, which focuses on economic diversification and reducing dependence on oil revenue. Encouraging foreign investment in equity markets is seen as a reliable way to strengthen the financial sector and improve national GDP over time.
How Companies Like Saudi Aramco May Benefit
With greater investor access, major companies listed on Tadawul are likely to see a positive impact. Firms like Saudi Aramco, which already attract global interest, may experience increased liquidity and demand. More investors entering the market leads to higher share activity, which could improve stock value and visibility on the global stage.
Expanding Market Liquidity and Investor Base
This decision is expected to expand the overall liquidity of the Saudi market. A larger number of participants naturally leads to more trades and a dynamic flow of capital. Moreover, it helps Saudi Arabia attract a broader, more diversified investor base—ranging from regional business professionals to global expatriates who once lived in the Kingdom.
Direct vs. Indirect Investment: What’s Changing?
Previously, indirect investment through swap agreements meant investors had to depend on a third party. That often resulted in higher fees, less transparency, and fewer decision-making rights. With this update, investors can directly trade and manage their portfolios without giving up control. This change brings transparency, autonomy, and a better user experience for long-term investors.
Supporting a Global Investment Vision
This change supports Saudi Arabia’s intention to become a global investment powerhouse. Opening up its main market to regional investors is a strategic move toward achieving that vision. It builds trust in the Saudi capital market and signals to global financial institutions that the Kingdom is ready to compete with major financial centers around the world.
A Big Win for Regional Investors
The CMA’s decision to allow foreign individual investors living in the GCC to access Saudi stocks directly is a landmark reform. It improves investor freedom, enhances market participation, and aligns with Saudi Arabia’s long-term goals. Companies listed on the Tadawul Main Market stand to gain from greater demand and improved liquidity. As reforms continue, Saudi Arabia is clearly positioning itself as a more open, accessible, and globally competitive financial destination.
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