Up to $10bn of inflows could be unlocked by Saudi stock market reforms, experts say

Saudi Arabia: Saudi Arabia’s decision to open its financial markets to all foreign investors could unlock $10 billion of inflows and place the nation on an equal footing with other competitive emerging exchanges, experts told Arab News.

The Kingdom’s Capital Market Authority announced the sweeping changes on Jan. 6, including the removal of restrictions such as the Qualified Foreign Investor framework, which required a minimum of $500 million in assets under management, and abolishing swap agreements.

The changes, aimed at supporting investment inflows and enhancing market liquidity, will take effect on Feb. 1.

The move aligns with Saudi Arabia’s Vision 2030 program, which aims to diversify the Kingdom’s economy by reducing its reliance on crude revenues.

Speaking to Arab News, Hamza Dweik, head of trading at Saxo Bank for the Middle East and North Africa, said: “This reform is expected to unlock an estimated $9 billion to $10 billion in new inflows, adding to the SR519 billion ($138 billion) already held by foreign investors in the main market as of the third quarter of 2025.

“Greater participation will deepen liquidity in a market valued at over SR3 trillion and increase Saudi Arabia’s weighting in global emerging-market indices from approximately 3.2 percent to 4.7 percent.”

Kapil Chadda, partner at Arthur D. Little, Financial Services Practice, said the move is expected to make the Saudi market more attractive, improve liquidity, and enhance valuations due to increased demand for shares.

“Opening the Saudi market to all foreign investors allows both institutional and private investors to access listed Saudi companies directly. This puts Saudi Arabia on a more equal footing with other competitive emerging markets such as Brazil, India, and China, which are already easily accessible,” said Chadda.

He added: “A broader investor base means more foreign capital can enter the market, which should support higher liquidity and trading volumes, while simplifying access by removing complex qualification requirements.”

To strengthen the capital market in the Kingdom in recent years, Saudi Arabia has established exchange-traded funds with Asian partners in Japan and Hong Kong.

In 2025, Saudi Arabia also opened the door for foreigners to buy listed firms that own real estate in Makkah and Madinah, without changing restrictions on direct land ownership.

Rapid FDI expected

To facilitate foreign investment, CMA has introduced several changes, which include abolishing the QFI framework and asset requirements, eliminating swap agreements, and simplifying account opening for current and former Gulf Cooperation Council residents.

Tony Hallside, CEO of STP Partners, said the move marks a pivotal evolution in the Kingdom’s economic transformation.

He believes the CMA decision is a clear signal to the world that the Kingdom is now building the most accessible, liquid, and globally integrated financial markets in the region.

Hallside added: “This reform reflects Saudi Arabia’s deep commitment to unlocking new sources of capital, supporting innovation, and accelerating its Vision 2030 agenda.”

Vijay Valecha, chief investment officer at Century Financial, echoed similar views and said Saudi Arabia is expected to witness a rapid inflow of foreign direct investment into the Kingdom.

“Looking at the possible benefits Saudi Arabia could gain from opening its capital markets, it will now increase FDI flows. Empirical evidence suggests that FDI has played an ambiguous role in contributing to economic growth,” said Valecha.

The Century Financial official added that the CMA decision will also play a crucial role in materializing Saudi Arabia’s foreign direct investment ambitions.

“One of the three main pillars of Vision 2030 is building a thriving economic environment that supports growth by expanding the private sector and increasing FDI. This step is directly feeding into this by encouraging global investors to participate in Saudi Arabia’s growth story and gain exposure to a rapidly emerging market,” added Valecha.

Investment sectors

According to Saxo Bank’s Dweik, foreign investors are expected to focus on sectors aligned with Vision 2030 priorities, including technology and digital transformation, renewable energy and green hydrogen, mining and metals, logistics and infrastructure.

He added that inflows will also happen in booming sectors in Saudi Arabia, which include tourism, healthcare, and entertainment.

“These sectors offer strong growth potential, with petrochemical profits projected to rise by 74 percent in 2025 and healthcare by 23 percent. Infrastructure and private-sector expansion have already driven non-oil private investment to SR1.3 trillion in gross fixed capital formation,” said Dweik.

Expected bull trend

According to Valecha, the Saudi market is set for a “systemic bull trend” in 2026 as foreign liberalization removes deep-rooted pricing impediments in the exchange.

Dweik expressed similar views and said the Saudi stock market is expected to perform positively following this opening.

Potential challenges and combat measures

Amid significant scope for positive future outcomes, experts also highlighted some of the potential challenges that could arise in the future.

“Foreign investors who position early in liquid strategically aligned sectors stand to benefit the most, though challenges around regulatory clarity, governance standards, and valuation discipline remain key considerations,” said Shitole.

“Building strong local partnerships and understanding the regulatory landscape will be essential to mitigate risks and succeed in this evolving market,” he concluded.