RIYADH: The Saudi Arabian Capital Market Authority (CMA) has tightened rules on how long shares in listed firms can trade if the companies have large accumulated losses, it said yesterday, in a move that analysts said could soon affect several firms.
The new rules will compel companies with losses totalling 50 percent of their capital to announce plans to remedy their financial standing, and will impose penalties including suspension of trading on companies with bigger losses.
They will come into effect in July next year.
Saudi Arabia, home to the Gulf Arab region’s largest stock exchange, is considering opening its bourse to direct investment by foreigners. Market participants hope a series of slow changes to the regulatory framework, bringing it closer to international standards, will facilitate that move. CMA chief Mohammed bin Abdulmalik Al Al Sheikh, who was appointed in February, proposed the new rules in May along with suggested changes on how to calculate a stock’s closing price, in order to limit excessive speculation in shares.
Seven companies listed on the all-share index, including some insurance companies, now have accumulated losses of between 50 and 75 percent, said Turki Fadaak, head of research at Al Bilad Investment Co.
“Competition in the insurance sector forced small companies to incur losses over the past few years - such companies compete with large giants whose capital is SR1bn ($265m),” Fadaak said.
Under existing regulations, sanctions only start when a company’s accumulated losses pass the 75 percent mark.
Reuters
