Saudi Arabian stocks experienced their most significant daily increase since 2020 on Wednesday, fuelled by reports suggesting that the markets regulator may relax regulations that limit foreign ownership of listed companies. The Saudi benchmark index surged more than 5%, reaching its highest level since May, after Bloomberg News reported that regulators are considering easing the existing 49% cap on foreign ownership of listed firms. This move is anticipated to reinvigorate interest in the Arab world’s largest stock exchange. Abdulaziz Abdulmohsen Bin Hassan, a CMA board member, indicated that the change could be implemented before the end of the year.
UBS projects that increasing the foreign ownership limit to 100% could trigger an additional passive inflow of $9.5 billion to $10 billion into Saudi Arabia from both MSCI and FTSE index trackers, according to Victor Martin, the bank’s head of portfolio trading for the EMEA region. Mohammed Ali Yasin, CEO of Ghaf Benefits at Lunate, noted that even with the current 49% limit, foreign ownership rarely exceeds 15% on average in most large-cap companies. The rally on Wednesday reflects expectations that easing the rules would boost the weighting of Saudi public companies in the larger MSCI and FTSE indices, leading to increased foreign inflows into those shares.
Tariq Qaqish, Deputy CEO of FH Capital in Abu Dhabi, believes this step will strengthen liquidity and depth in the Saudi market, tighten bid-ask spreads, and expand institutional participation. Saudi Arabia has been actively working to attract foreign investors through various initiatives, including establishing exchange-traded funds with Asian partners in Japan and Hong Kong. Regulators in January also permitted foreigners to purchase listed firms owning real estate in Mecca and Medina, without altering restrictions on direct land ownership.
The Saudi benchmark index has underperformed other regional markets this year, such as Dubai and Kuwait, due in large part to weaker oil prices. The kingdom’s largest blue-chip stocks, including Saudi Aramco, have struggled to maintain gains in 2024.
