RIYADH, May 5 (Reuters) – Foreigners will be allowed to buy directly into initial public offers of shares in Saudi Arabian companies on a case-by-case basis, the chairman of the Saudi Capital Market Authority said on Tuesday.
The CMA announced on Monday rules allowing foreign institutions to begin investing directly in the stock market, subject to restrictions such as a 10 percent cap on combined foreign ownership of the market.
But IPOs are a special matter because they are usually priced in Saudi Arabia well below market value, as a way to spread the kingdom’s oil wealth among its citizens. Letting foreign investors buy directly into the offers could be politically sensitive.
CMA chairman Mohammed al-Jadaan, speaking at a major financial conference on Tuesday, said the regulator and individual companies would decide on a case-by-case basis whether to permit direct foreign participation in IPOs.
“It is a coordination between the issuer and the CMA,” he said.
“It is quite open for interpretation. There are no restrictions. It will be up to the market and what the CMA feels the market requires at the time.”
Jadaan also said that while he couldn’t speculate, personally he didn’t believe there would be a sudden flood of foreign funds into the stock market when it opened on June 15.
On the possibility of relaxing foreign ownership restrictions in future, he said: “Hopefully as the market moves and as the market matures, things could be relaxed.” He did not elaborate. (Reporting by Angus McDowall and David French; Writing by Andrew Torchia)