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Saudi Arabia is opening up its IPO market to foreign investors

Key Points
  • The Kingdom aims to raise about $100 billion by taking a portion of its state oil giant public next year
  • Amin Nasser, chief executive of Saudi Aramco, has repeatedly said that the listing is on track for 2018
The Kingdom Tower, operated by Kingdom Holding Co., centre, stands on the skyline above the King Fahd highway in Riyadh, Saudi Arabia.
Simon Dawson | Bloomberg | Getty Images

Foreign investors are now able to participate in initial public offerings (IPO) within Saudi Arabia and will be given access to a stock market aimed at small and medium-sized businesses.

Mohammed El Kuwaiz, chairman of the country's Capital Market Authority (CMA), said Thursday that foreign investors can take part in company flotations when asked about the IPO of oil giant Saudi Aramco, according to Reuters.

The Kingdom aims to raise about $100 billion by taking a portion of its state oil giant public next year. The funds will underwrite an effort led by Crown Prince Mohammed bin Salman to diversify the nation's economy through a plan called Vision 2030.

Amin Nasser, chief executive of Saudi Aramco, has repeatedly said that there will be a dual-listing — one in Saudi Arabia and a second on in an international market. He has also said that this remains on track for 2018.

NOMU parallel market

Speaking at Riyadh's Future Investment Summit on Thursday, the chairman also announced that non-resident foreign investors will be able to investor directly into the NOMU parallel market from January next year, according to the news agency.

NOMU is an equity market with lighter listing requirements that serves as an alternative platform for companies to go public. Foreign investors will no longer have to meet requirements to qualify as foreign institutional investors, according to the news agency but will have to continue to obey limits on foreign ownership of stocks.

The initiatives are part of Saudi Arabia's push for opening up and diversifying its oil-dependent economy. Riyadh is cutting red tape and removing barriers to investment in an attempt to achieve that.

'Davos in the desert'

Over the last few days, Saudi Arabia has also announced a $500 billion plan to build an area for business and industry connecting with Jordan and Egypt, during the Future Investment Initiative conference — also known as the "Davos in the desert."

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Jassim Alseddiqi, chief executive office of Abu Dhabi Financial Group — a multi-billion dollar investment company from Abu Dhabi — told CNBC that Saudi Arabia is becoming increasingly more attractive.

"What's really interesting to us in Saudi is the transformation and the openness that's happening," he said.

"We've recently increased our appetite to invest in Saudi (Arabia). We are releasing a real estate investment trust that's going to be traded on the Tadawul stock exchange. We are expanding our finance business," he added.

Saudi Arabia's consumer industries make it an investment destination: Expert

Mustafa Abdel-Wadood, managing partner at the Abraaj Group, another investment firm, told CNBC this week that its core investment strategy remains in emerging markets, of which Saudi Arabia is one of those destinations.

"These are high-growth markets, Saudi is one of our investment destinations," he said Wednesday, mentioning a young population, a large and growing consumer base and a growing middle class.