(Bloomberg) — Saudi Arabia opened its equities to all foreign investors, the latest step in the kingdom’s efforts to boost flows into the Middle East’s largest market.
The Saudi Capital Market Authority said it removed all restrictions that stipulate foreigners must meet certain qualifications to carry out transactions on the Saudi market. One such restriction required investors to have at least $500 million in assets under management.
“The approved amendments eliminated the concept of the Qualified Foreign Investor (QFI) in the Main Market, thereby allowing all categories of foreign investors to access the market without the need to meet qualification requirements,” the regulator said in a statement on Tuesday after the market closed.
The decision allows non-residents to invest directly in the main Saudi market from Feb. 1., and marks the latest in a rush of market reforms. Authorities are looking to revive the stock market, where the benchmark Tadawul All Share Index dropped nearly 13% last year, performing worse than major emerging-market peers.
Foreign ownership in the $2.3 trillion Saudi stock market stood at over 590 billion Saudi Riyals ($157.3 billion) at the end of September with around 88% of it parked in the main index, according to the regulator’s statement. Tuesday’s changes are expected to “contribute to attracting additional international investments,” it said.
Riyadh’s need for foreign inflows is becoming increasingly pronounced as high spending and low oil revenues drive the government into deeper budget deficits, threatening to slow investments.
A wider pool of investors could bode well for the Saudi market which has dozens of companies seeking approval to list shares locally. The chief executive officer of the Saudi stock exchange in December said 40 companies had applied to go public, with the tally of initial public offering hopefuls climbing to as many as 100.
“The continued progress towards the liberalization of Saudi Arabia’s capital markets represents not only a significant milestone for the kingdom itself but also for the wider region,” said Adnan El-Araby, an investment manager at Barings. “By lowering entry barriers and attracting a broader spectrum of investors, these reforms are poised to inject some interest into Saudi Arabia’s equity market.”
Local stocks rallied in September after Bloomberg reported that the kingdom may soon ease foreign limits. The gains faded after a regulator said that policymakers haven’t yet decided whether to eliminate the cap or lift it slowly in their 2026 review.
Tuesday’s announcement brings that much-anticipated decision back in focus for the Saudi market which is in need of a boost after last year’s slump.
“Our index team calculates that a foreign ownership limit increase, a development now anticipated widely by market participants following today’s development, from current 49% to 60-100% could attract $3.4 billion-$10.2 billion of passive inflows from MSCI and FTSE index trackers,” said Naresh Bilandani, managing director of equity research at Jefferies International Limited.
–With assistance from Farah Elbahrawy and Tugce Ozsoy.
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