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Saudi Arabia sets rules for foreign investment in stock market

Saudi Arabia's Capital Markets Authority (CMA) has published the final rules for foreign investors in its stock market. 06 May 2015

From 15 June, qualified foreign investors including banks, brokerages, fund managers and insurance companies with at least 18.75 billion riyals (US$5 billion) in assets will be allowed to invest in the $530 billion stock market, known as the Tadawul.

Qualified foreign investors must be approved by the CMA, which reserves the right to reduce the minimum asset value to $3 billion, the CMA said.

The rules include a tax of 5% on dividends for foreign investors. A single investor may not own more than 5% of a company by stock market value, and a group of foreign investors cannot own more than 10%. Foreign ownership of a company cannot be more than 49% overall.

The regulator originally announced its intention to open up the market to foreign investors last year and has been consulting on draft rules.

Currently, only Gulf Cooperation Council (GCC) countries have access to the Tadawul. Foreign investors have been able to access the market through equity swaps and exchange-traded funds since 2008.

In 2012, Saudi Arabia allowed foreign companies to list their shares on its stock exchange. Previously foreign companies could only list their shares indirectly, for example through joint stock arrangements with foreign companies.