Saudi Arabia's Tadawul to allow foreign firms to list on biggest Arab exchange

New rule changes will permit companies to list directly on the junior Nomu market without an IPO

Visitors look at stock price information displayed on a digital screen inside the Saudi Stock Exchange, also known as the Tadawul, in Riyadh, Saudi Arabia, on Tuesday, April 10, 2018. Foreign investors bought more Saudi stocks in March than ever before in anticipation of the kingdom���s upgrade to emerging-market status. Photographer: Abdulrahman Abdullah/Bloomberg
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Saudi Arabia's stock exchange, Tadawul, will allow foreign companies to list on its exchange.

Foreign firms will be able to list on the exchange and will be "subject to the same listing, disclosure and governance requirements as Saudi listed companies", Tadawul said in a statement following publication of amended listing rules from the regulator, the Capital Markets Authority.

"Foreign listings on the Saudi market reflects the importance of integration between capital markets in the region," Khalid Al Hussan, chief executive of Tadawul, said in a statement announcing the rules. "This will facilitate issuers’ access to new funding resources and enable investors to reach a diversified pool of investment tools."

Tadawul and the CMA had been jointly working on provisions and signed agreements with other exchanges in the region to facilitate dual listings. The Securities Depository Centre Company (Edaa), a company owned by Tadawul, has signed agreements with Abu Dhabi Securities Exchange and Bahrain Clear to allow foreign companies to list on Tadawul, and to unify administrative and operational procedures between the countries.

Other new rules includes a provision allowing smaller companies to seek a direct listing on the exchange's junior market, Nomu, without undertaking an IPO and a requirement for listed companies to inform the market if they apply to courts for a financial restructuring or an administration process under the kingdom's bankruptcy law, which was introduced last year.

The new rules are the latest in a string of reforms made to the kingdom's capital markets over the past few years which have attracted foreign investment and led to the stock exchange being upgraded to emerging market status by index providers FTSE Russell, MSCI and S&P Dow Jones. This has brought billions of dollars of investment into Saudi equities by passive funds which track indexes.  In the first nine months of the year, the Tadawul All-Share Index gained in value by 3.9 per cent, with a total market capitalisation of $501.6 billion by the end of September, according to Kamco Research.

“The transformation in Saudi Arabia, the key one in my view, is the liberation of capital markets,” JP Morgan's global head of corporate banking, Sjoerd Leenart, told a Bloomberg capital markets conference in Abu Dhabi last week.

"They moved in two to three years from a fairly closed market with 1 per cent of foreign [investors’] participation to being included in the FTSE and MSCI [indexes] and generating $22bn of inflows," he said.

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