Saudi Arabia Considers Major Changes to Foreign Ownership Rules

Saudi Arabia is on the verge of a significant transformation in its foreign ownership regulations, potentially eliminating existing limits on foreign investment in publicly listed companies. This move has already sparked a notable reaction in the financial markets.

Market Response to Potential Changes

The Tadawul All-Share Index, which tracks the performance of publicly traded companies in Saudi Arabia, experienced a remarkable surge of over 5 percent—marking its largest single-day gain in five years. On a particularly active trading day, the index recorded approximately $3.86 billion in trades, nearly doubling the average trading volume over the past three months.

Key Players in the Market

Among the top performers on this pivotal trading day were companies such as Alimna, Dar Alarkan, the Tadwal Group, and Gasco, each witnessing gains close to the maximum allowable increase of 10 percent. This uptick reflects a growing optimism among investors regarding the potential for increased foreign participation in the Saudi market.

Insights into Foreign Ownership Regulations

Recent reports from Bloomberg indicate that the Saudi Capital Market Authority (CMA) is contemplating the removal of restrictions that currently limit foreign ownership of listed companies to a maximum of 49 percent. If implemented, these changes would allow foreign investors to acquire majority stakes in Saudi firms, a significant shift from the existing framework.

Timeline for Implementation

According to sources, the CMA is aiming to introduce these new regulations before the end of 2025. This timeline suggests a proactive approach to enhancing the investment landscape in Saudi Arabia, aligning with the Kingdom’s broader economic diversification goals.

Implications for Investment

The strong market reaction underscores a palpable demand for investment opportunities within the region. Currently, foreign investors are restricted to minority stakes in Saudi companies, but the proposed changes could pave the way for a substantial influx of capital. Analysts from JP Morgan and EFG Hermes estimate that incoming investments could exceed $10 billion if these new rules come into effect.

Expert Opinions on the Changes

Edward Bell, Acting Group Head of Research and Chief Economist at Emirates NBD, commented on the potential impact of these changes. He noted that increasing the allowable foreign ownership limit would enhance the appeal of Saudi equities to passive investors and improve the Kingdom’s representation in global benchmark indices. This could lead to a more robust investment environment, attracting a diverse range of international investors.

Conclusion

As Saudi Arabia contemplates these significant changes to its foreign ownership rules, the financial markets are already responding positively. The potential for increased foreign investment could not only bolster the Kingdom’s economy but also enhance its standing in the global financial landscape. The coming years will be crucial as these developments unfold, shaping the future of investment in Saudi Arabia.