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The Saudi Stock Exchange opened to qualified foreign investors (QFI) for the first time one month ago, and increased involvement of international investors on the Exchange is expected as a result.
Increased participation from international financial institutions is primarily designed to help to enhance the sophistication and stability of the market. The additional reforms to open the Exchange to QFIs aim to enhance corporate governance among firms by enabling international institutions to have an active voice as shareholders in listed businesses. These investors are also expected to enhance research coverage and improve local knowledge and expertise, bringing benefits to all market stakeholders – listed companies, investors and financial intermediaries.
Overall stability of the market over the medium term is expected to increase with the introduction, in a measured manner, of direct investment by foreign institutions. This will come alongside moves to encourage a rebalancing of current stock market participants from individual investors – who account for approximately 34% of market ownership and 90% of monthly trading activity – to institutional investors.
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