Doha/Dubai: Qatar’s emir has issued a law providing for foreign investors to own up to 49 per cent of listed Qatari companies, part of reforms to expand the stock market and develop the financial industry.

“The law stipulates that non-Qatari investors are allowed to own no more than 49 per cent of the shares of Qatari shareholding companies listed on Qatar Exchange,” the official Qatar News Agency (QNA) said on Wednesday.

Originally announced in late May, the law also lets foreigners own more than 49 per cent of a firm in special cases if they obtain approval from the Qatari cabinet.

In another market-opening step, citizens of the six-nation Gulf Cooperation Council will be treated as Qatari citizens for the purpose of owning firms listed on the Qatar Exchange. This will provide more room for non-GCC foreigners to own shares.

Currently, listed Qatari firms impose ceilings on combined foreign ownership that are usually no more than 25 per cent, though some have already raised their ceilings above that level.

Al Khaliji Commercial Bank said in February, for example, that its shareholders had approved an increase in its foreign ownership ceiling to 49 per cent.

It was not immediately clear from the QNA report whether all Qatari firms would now be obliged to raise their ceilings to 49 per cent, or how much time they would have to do so. Officials could not be reached to clarify the issue on Wednesday.

“We have not been informed by the regulators on how this law will be implemented. We have been waiting for someone to explain since May, but so far we don’t know if it will be mandatory to raise investment to 49 per cent,” said a Western bank executive, declining to be named because of the sensitivity of the matter.

QNA said companies would need the approval of the Ministry of Economy and Commerce for increases to their foreign ownership ceilings in their articles of association. This may mean the ministry could specify ceilings below 49 per cent in some cases.

At present, foreign investment in most listed Qatari companies is not near their current ceilings, and even if investors are allowed to accumulate large stakes, it is not clear they will want to do so in a market which lacks the liquidity of bigger stock markets.

The free floats of many major Qatari firms are limited by large stakes held by the government; for example the Qatari state owns 43 per cent of Qatar National Bank, according to Thomson Reuters data.

Nevertheless, the reform may help in the long run to attract more foreign money into the Qatar Exchange, which with a capitalisation of $193 billion ($708.8 billion) is the second largest bourse in the GCC, after Saudi Arabia.

Qatar’s market has risen strongly this year on the back of its upgrade in May by international index compiler MSCI to emerging market status from frontier market status. The main index, down 0.2 per cent in afternoon trade on Wednesday, is up 27 per cent year-to-date.

“It’s a step in the right direction, but it will have to be backed up by good performance from companies in order to attract foreign investment,” one wealth manager in the Gulf said of the reform.

“There should be limited impact from the law in the short term due to liquidity issues and limited numbers of shares available.” Saudi Arabia, which has a market nearly three times the size of Qatar’s, announced last month that it would open its bourse to direct investment by foreign institutions in the first half of next year.