Saudi Arabia’s stock market surged on Wednesday after reports that the Capital Market Authority (CMA) is close to approving a landmark change lifting the ceiling on foreign ownership in listed companies.
The benchmark Tadawul All Share Index leapt more than 5% in heavy trade topping 14 billion riyals ($3.7 billion), snapping back from a slump that had wiped over 10% off its value since the start of the year. The rally extended the index’s winning streak to six sessions, adding nearly 1,000 points, or close to 10%.
Bloomberg cited CMA board member Abdulaziz bin Hassan as saying the regulator is preparing to raise the current 49% cap on foreign holdings and that the decision is “almost ready” to take effect before year-end.
Under existing rules, non-resident and resident foreign investors cannot own more than 49% of any listed company, except strategic investors. So far, foreign ownership has not exceeded 45% in any firm.
News of the plan sparked a broad rally led by banks and real estate stocks, with traders betting a higher cap would boost demand and liquidity. Analysts said the change would also lift Saudi stocks’ weighting in major global benchmarks such as MSCI, drawing more passive inflows from international funds.
JPMorgan Chase and EFG Hermes estimate Saudi equities could attract about $10 billion if the cap is lifted to 100%, with Al Rajhi Bank expected to be the biggest beneficiary, drawing between $5 billion and $6 billion.
The Saudi market currently lists 261 companies, with shares in more than 97% of them closing higher on Wednesday.
Finance Minister Mohammed al-Jadaan said last week the bourse is among the fastest-growing globally, with a market capitalization of $2.4 trillion at the end of the second quarter.
Saudi stocks have been included in major global indices since 2018, including MSCI and FTSE Russell’s emerging markets benchmarks, boosting their appeal to foreign investors.
Last week, JPMorgan Saudi Arabia also placed the kingdom on its positive watchlist for inclusion in its widely tracked emerging market bond index, a move expected to draw another $5 billion in flows.
Analysts say blue-chip sectors with heavy index weightings such as banking, telecoms and petrochemicals are set to benefit most, alongside companies tied to Saudi Arabia’s Vision 2030 projects and those with consistent dividends. Shares of Al Rajhi Bank and Saudi National Bank both hit the 10% daily limit on Wednesday.
“The fundamentals remain supportive in the medium to long term, with government spending, Vision 2030 megaprojects and now wider foreign access underpinning the outlook,” Hussein al-Attas, a financial consultant, told Asharq Al-Awsat.
Mohammed al-Maimouni, a financial adviser at Al Motadawel Al Arabi, said further details are expected on which sectors foreigners will be allowed to own fully, noting that some markets restrict foreign holdings in banking and insurance.
He added that momentum could push the main index towards 12,000 points this week, with a “solid” rally by the end of the quarter.
