Saudi Arabia plans to let foreign investors buy listed bonds

DUBAI (Reuters) - Saudi Arabia plans to let foreign institutional investors buy exchange-listed debt instruments as part of reforms intended to draw more foreign money into its markets, the Capital Market Authority (CMA) said on Wednesday (June 22).

After opening its equity market to direct investment by foreign institutions in June 2015, Riyadh last month announced steps including the abolition or easing of ceilings on foreign buying of stocks and a reduction in the minimum amount of assets which institutions must have under management.

On Wednesday, the CMA confirmed that amendments to its regulations it had proposed on Monday would allow investment in debt, as it changed references to "shares" in the rules into"securities".

"According to the suggested amendments, Qualified Foreign Financial Institutions (QFIs) are allowed to invest in the debt market," the regulator said in a statement.

Access to debt instruments could increase the interest of foreign asset managers in Riyadh's securities exchange.

It only had about half a dozen listed bonds and sukuk at the end of last year, exchange data shows, but authorities have said they will encourage more issuance and trading of Saudi corporate debt.

However, concern about trading restrictions, liquidity and an economic slowdown caused by low oil prices have so far limited flows of foreign money into the exchange, and fund managers believe this may not change quickly.

All types of foreign investors, including residents as well as foreign institutions and investors using indirect means such as swaps, own only marginally more than 1 per cent of the stock market's capitalisation, bourse data shows.

The CMA has published its amendments seeking public comment during a 30-day period from June 20. It has previously said its reforms will be implemented by the middle of 2017.