Commenting on the opening of Saudi bourse to foreign investment to boost Mena markets, Anum Saleem who is a Senior Associate in the corporate and commercial group in the Eversheds Saudi Arabia office - said:
“Though the Saudi bourse has reacted positively to the government's recent indication to open it to the foreign investors by the second half of 2015, one must tread this path cautiously as things move at their own pace in Saudi Arabia. While there is no reason to doubt the intention of the government, there is no guarantee that this measure will materialize within the given timeframe.
The Saudi government’s decision to allow investors to invest in the stock market directly and exercise voting rights is likely to spur the concept of activist shareholders in the kingdom, as opposed to a purely monetary participation in the listed companies before. Companies will benefit by receiving management, accounting or legal guidance in keeping with the best practices practiced by their foreign shareholders. The companies can also take advantage of the latest technology, innovations in operational practices, and new financing tools that they might not otherwise be aware of. By adopting these practices, the companies can enhance their efficiency and adopt beneficial corporate governance practices.
The influx of foreign investors is also likely to generate more M&A activity in the Kingdom, in line with the ME region, as the investors will start looking at the Saudi private sector more closely. This will bode well for the Saudi private sector as their business valuations are likely to increase serving as an impetus to entrepreneurship and employment opportunities for the local population.”