Saudi Arabia’s stock market is approaching another milestone in its opening to international investors, as it eases foreign ownership restrictions on listed companies. The move could pave the way for billions of dollars in new inflows while raising questions over the market’s ability to translate regulatory opening into sustained investor demand.
Morgan Stanley estimates that increasing the foreign ownership ceiling from 49% to 75% could attract about $4.3 billion in index-tracking inflows, rising to $7.4 billion if the cap is removed entirely.
The estimates followed the appointment of Mazen al-Sudairi as chairman of the Capital Market Authority, reinforcing expectations that further measures could be introduced to increase the Saudi market’s appeal and depth and draw additional foreign capital.
Saudi stock market data, however, show that overseas holdings are not necessarily distributed according to company size or market capitalization. Rasan leads with foreign ownership of about 38.87%, followed by East Pipes Integrated Company at 30.05%, Al-Babtain Power and Telecommunication at 26.42% and Edarat Communication and Information Technology at 24.22%.
The companies with the highest foreign ownership also include Mobily at 23.19%, Jarir Marketing at 21.95%, Saudi National Bank at 18.92%, Tawuniya at 18.88% and eXtra at 17.90%.
The disparities raise questions over whether a higher ownership ceiling alone would be enough to strengthen international demand for Saudi stocks, or whether additional inflows will depend more heavily on listed companies’ appeal, valuations and financial performance, alongside any forthcoming regulatory changes.
Billions tied to indexes
Financial markets analyst Abdullah al-Hamed said that expanding the foreign ownership limit would boost international capital flows through two main channels.
The first involves passively managed funds that track global indexes such as S&P and FTSE. Allowing foreigners to own up to 75% or 100% could increase Saudi Arabia’s potential weighting in those indexes, generating flows in line with benchmark weights regardless of the investment appeal of the individual stocks themselves.
The second involves actively managed funds, which may take longer to enter because their decisions depend on overall market conditions and corporate performance rather than index weightings.
Al-Hamed expects the measure to have a positive effect, with inflows potentially reaching about $7 billion in the best-case scenario.
Decisions by international investors to increase their Saudi equity holdings also depend on the performance of the domestic economy, driven by Saudi Vision 2030 initiatives, economic diversification and the expanding role of the private sector, as well as valuations, earnings growth and companies’ future prospects.
Al-Hamed added that steps by regulators, particularly the Capital Market Authority and Ministry of Investment, to facilitate investor access enhance Saudi equities’ appeal to international institutions. Major stocks, such as Al Rajhi Bank and Saudi National Bank, could be among the main beneficiaries, given global investors’ interest in heavily weighted index constituents.
Growth opportunities
Financial and economic adviser Hussein al-Attas said easing the ownership restriction would be positive for Saudi equities, but is neither the only nor the main factor behind higher inflows, given that most listed companies remain well below the current 49% ceiling.
The direct impact could therefore be concentrated in a limited number of stocks that attract strong overseas demand or face constraints on their relative index weightings. More broadly, the change would remove a potential future obstacle for global investors and institutions and broaden the range of opportunities available in Saudi Arabia.
Al-Attas noted that allocation decisions are shaped by valuations, earnings growth, liquidity, governance and market depth, as well as the ease of entering and exiting investments.
Regulatory clarity, continuity of economic reforms and the diversity of opportunities have also become increasingly important, particularly as the Kingdom undergoes transformation in technology, tourism, logistics, energy and mining.
Al-Attas also pointed to a gradual shift in foreign appetite away from index-related investments and blue-chip stocks toward more specialized growth opportunities. International investors have become more selective and increasingly view Saudi Arabia not simply as an oil or banking market, but as one offering opportunities tied to economic transformation and Vision 2030.
He expects overseas investors to maintain a strong presence in blue-chip stocks because of their liquidity, depth and ability to absorb large institutional allocations.
However, the strongest potential growth in foreign ownership could come from high-growth companies, particularly in newer sectors or those underrepresented in global portfolios, including technology, healthcare, consumer services and logistics.
Al-Attas argued that greater market depth and a broader base of companies and sectors capable of generating sustainable earnings growth will be the most important factors in increasing foreign allocations.
A higher ownership ceiling is important, but investors ultimately need sizable opportunities, high liquidity, attractive valuations and companies capable of translating economic growth into tangible earnings and returns, he said.
Slight decline in foreign ownership
Saudi stock market data showed limited changes in overseas holdings in several listed companies during the Sept. 1, 2026 session.
Foreign ownership in Saudi Fisheries rose 0.57 percentage point to 5.42%, while Yanbu Cement gained 0.50 point to 9.39%. Holdings also increased to 7.04% in MESC and 18.26% in eXtra.
By contrast, foreign ownership declined in several companies, including Rasan to 39.29%, Al-Babtain to 25.56%, Edarat to 24.31%, Mobily to 22.67% and Jarir to 22.04%.
Easing foreign ownership restrictions would mark another step in opening the Saudi market, but would not by itself guarantee additional capital inflows.
Recent ownership movements reveal clear differences in investor appetite across listed companies, underscoring that stocks’ appeal will continue to depend on earnings growth, performance, valuations, liquidity and market depth.
The real test, therefore, will be the market’s ability to turn regulatory opening into sustainable opportunities capable of attracting foreign capital.
