Clearstream, the post-trading services provider of Deutsche Boerse Group, is set to connect the Saudi capital market to its network through a linkage with the Securities Depository Center Company (Edaa).
Edda is a company fully owned by Saudi Tadawul Group and responsible for operating and maintaining the depository and settlement system (DSS).
The move will make Clearstream the first international central securities depository (ICSD) to offer international investors access to the Saudi capital market. Its eligible clients will be allowed to access and trade on the Saudi Exchange commencing 14 June 2021.
This will be conducted through the indirect linkage that will be established via HSBC Saudi Arabia who will act as the local custodian for Clearstream.
According to Clearstream, this step will give international investors seamless access to the Saudi capital market by enabling settlement of Saudi Exchange-listed government bonds, non-convertible corporate bonds and exchange-traded funds (ETFs) denominated in Saudi Riyal (SAR).
Meanwhile, eligible customers will not have to apply for Qualified Foreign Investor (QFI) status to invest in the Saudi Sukuk/bonds market and ETFs listed on the Saudi Exchange.
International investors will also be eligible to hold Saudi fixed-income securities and ETFs via a foreign nominee omnibus account structure, benefitting also from the usual suite of ICSD services, including offshore (internal) settlement.
As a result, an increase in demand for Saudi government bonds from cross-border investors is expected, thereby improving liquidity in the domestic market, explains Clearstream.
Jan Willems, head of global markets at Clearstream, comments: “The Saudi capital market has been increasingly attractive to international investors. We are excited to now offer our clients access together with excellent market partners with great local reach.”
Willems explains: “Adding the Saudi market to our network is a further token of Clearstream’s commitment to support emerging capital markets in their integration into the global financial system, creating further investment opportunities backed by our trusted, high-quality service offering.”
Raed Alhumaid, CEO of Edaa, adds: “The linkage with the International Central Securities Depository Clearstream reflects our efforts to facilitate the access of international investors to the Saudi capital market, while strengthening bridges between local issuers and foreign investors, especially in regards to debt instruments listed on the Saudi Exchange, this is in line with the objectives of the Financial Sector Development Program, part of Vision 2030.”
Over the last years, the Saudi capital market has seen an increased appetite from foreign investors for Saudi listed Sukuks and bonds, as the market issuances grew to over USD 106 billion in Q1/2021, with the increased global demand on government issuances.
In March this year HSBC acted as custodian and agent lender for the first-ever securities lending transaction in the Kingdom of Saudi Arabia.
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