DUBAI, (Reuters) – Saudi Arabia’s regulator adjusted stock ownership guidelines in a bid to boost transparency on Tuesday, as the Middle East’s biggest bourse takes gradual steps toward opening up to direct foreign investment.
Foreign buyers of Saudi stocks currently do so through swap arrangements with an authorized entity in the kingdom making the ultimate owner unknown. Under the new guidelines, the actual owner of the stock will now be identified.
The move will help the regulator impose ownership limits when the market eventually opens up, using the Qualified Foreign Institutional Investor (QFII) route.
“It is not changing the ownership rules, but only distinguishing between portfolios,” Walid Al Bawardi, cash markets director at Tadawul, the Saudi bourse, told Reuters. “Instead of having a collection of beneficiaries under the name of an institution, we will divide them under the name of the beneficiaries.
“It is more protection for the investor just in case there is a default on the broker and a better way to distinguish what is held,” he added.
Saudi Arabia has been considering a wider opening of its market for several years.
In December, industry sources told Reuters that it planned to offer a limited direct foreign ownership. At the time, sources expected this to happen by mid to late first quarter of 2012.
The opening up of the stock market is likely to attract considerable interest as it offers foreigners a chance to invest directly in blue chips like Saudi Basic Industries (SABIC) , the world’s most valuable chemical company. Other big players in the exchange include Samba Financial, the country’s second-largest lender by market value, and former monopoly Saudi Telecom.
The Saudi Stock Exchange is largest market in the Middle East, with around 150 listed companies valued at $337 billion, dwarfing the Dubai bourse’s $28.5 billion and Qatar’s $97 billion, according to Thomson Reuters data.