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Saudi Arabia Eases Requirements for Foreign Institutional Investors in Stock Market

Saudi CMA Logo
Saudi CMA Logo
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Saudi Arabia Eases Requirements for Foreign Institutional Investors in Stock Market

Saudi CMA Logo
Saudi CMA Logo

Saudi Arabia’s Capital Market Authority (CMA) has decided to ease requirements in an effort to draw more capital into the country's stock market.

This is done by reducing the minimum value of assets under management needed for an institution to qualify as an investor to 1.875 billion riyals ($500 million) from 3.75 billion riyals.

In this regard, the new step is expected to have a positive impact on the local stock market and will follow a new phase in which the Saudi market will be put on the list of emerging market indices whether through MSCI or FTSE, the two indices that are close to listing the Saudi stock market in the list of emerging global markets.

In this context, Saudi CMA opened the bourse to direct investment by qualified foreign institutions in 2015.

It reduced minimum requirements for the institutions in 2016 and is now proposing a fresh round of reforms, giving the public 14 days to comment on the proposals.

Red tape in the qualification process would be simplified, while institutions could qualify subsidiaries and managed funds without submitting a separate application for each of them.

The CMA said it would also recognize a wider range of other regulatory jurisdictions as acceptable to Saudi Arabia.

On the other hand, the efforts exerted by CMA through developing its regulations have resulted in moving the Kingdom's ranking upward in the Investor Protection Index from 63rd place in 2017 to 10th in 2018, as indicated by World Bank's 2018 Ease of Doing Business report.

The index is considered a mirror to measure the degree of protection offered to a minority of investors, and it is based on several factors that focus on the preservation of shareholders' rights and the extent of transparency and disclosure in companies.

The World Bank Group also noted the data in its report were based on questionnaires involving lawyers specializing in corporate and securities laws, on securities systems, corporate laws and civil codes of procedure and evidence.

The ranking of economies in the index is determined by the strength of the minority investor protection system in each country.

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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
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Revenue Growth, Improved Operational Efficiency Boost Profitability of Saudi Telecom Companies

A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)
A man monitors the movement of stocks on the Saudi Tadawul index. (AFP)

Telecommunications companies listed on the Saudi Stock Exchange (Tadawul) achieved a 12.46 percent growth in their net profits, which reached SAR 4.07 billion ($1.09 billion) during the second quarter of 2024, compared to SAR 3.62 billion ($965 million) during the same period last year.

They also recorded a 4.76 percent growth in revenues during the same quarter, after achieving sales worth more than SAR 26.18 billion ($7 billion), compared to SAR 24.99 billion ($6.66 billion) in the same quarter of 2023.

The growth in the revenues and net profitability is the result of several factors, including the increase in sales volume and revenues, especially in the business sector and fifth generation services, as well as the decrease in operating expenses and the focus on improving operational efficiency, controlling costs, and moving towards investment in infrastructure.

The sector comprises four companies, three of which conclude their fiscal year in December: Saudi Telecom Company (STC), Mobily, and Zain Saudi Arabia. The fiscal year of Etihad Atheeb Telecommunications Company (GO) ends on March 31.

According to its financial results announced on Tadawul, Etihad Etisalat Company (Mobily) achieved a 33 percent growth rate of profits, bringing its profits to SAR 661 million by the end of the second quarter of 2024, compared to SAR 497 million during the same period in 2023. The company also achieved a 4.59 percent growth in revenues to reach SAR 4.47 billion, compared to SAR 4.27 billion in the same quarter of last year.

The Saudi Telecom Company achieved the highest net profits among the sector’s companies, at about SAR 3.304 billion in the second quarter of 2024, compared to SAR 3.008 billion in the same quarter of 2023. The company registered a growth of 4.52 percent in revenues.

On the other hand, the revenues of the Saudi Mobile Telecommunications Company (Zain Saudi Arabia) increased by about 6.69 percent, as it recorded SAR 2.55 billion during the second quarter of 2024, compared to SAR 2.39 billion in the same period last year.

Commenting on the quarterly results of the sector’s companies, and the varying net profits, the head of asset management at Rassanah Capital, Thamer Al-Saeed, told Asharq Al-Awsat that the Saudi Telecom Company remains the sector leader in terms of customer base expansion.

He also noted the continued efforts of Mobily and Zain to offer many diverse products and other services.

Financial advisor at the Arab Trader Mohammed Al-Maymouni said the financial results of telecom sector companies have maintained a steady growth, up to 12 percent, adding that Mobily witnessed strong progress compared to the rest of the companies, despite the great competition which affected its revenues.

He added that Zain was moving at a good pace and its revenues have improved during the second quarter of 2024. However, its profits were affected by an increase in the financing cost by SAR 26.5 million riyals and a rise in interest, while net income declined significantly compared to the previous year, during which the company made exceptional returns.