Saudi Arabia has announced a major liberalisation of its financial markets, allowing all foreign investors to access the kingdom’s capital market directly from February 1. The move, cleared by the Capital Markets Authority (CMA), is aimed at attracting more overseas investment and improving liquidity as the country advances with reforms.
The decision represents a significant shift in how the Saudi markets regulate foreign participation.
The new amendments have abolished, amongst others, the concept of a ‘Qualified Foreign Investor’. Until today, direct investments in Saudi equities were only permissible to foreign institutions meeting specific criteria on size, track record, and regulatory oversight.
By removing the QFI framework, the regulator has gotten rid of a requirement that deemed foreign investors demonstrate ‘direct and consistent’ access to the Saudi capital market. It thus opens the door, in reality, to a much more expansive pool of global investors.
According to the CMA, investors from around the world will be allowed to directly invest in the Saudi capital market without necessarily qualifying under any special category. The regulator said the changes are expected to support capital inflows, deepen the investor base, and enhance overall market liquidity.
The move should also align Saudi Arabia more with the way global markets work, making it easier for international funds and institutions to place capital in the kingdom.
The reforms come as Saudi Arabia pursues an ambitious plan for economic transformation in an effort to reduce its reliance on oil revenues. Attracting foreign investment is one of the key pillars of this strategy.
The kingdom has taken several steps in recent years to open its markets. They include launching exchange-traded funds with fellow Asian markets such as Japan and Hong Kong, and easing restrictions on foreign ownership in select sectors.
Last year, regulators allowed foreigners to buy shares in listed companies that own real estate in Mecca and Medina, but kept restrictions on direct land ownership in place. Saudi stocks also jumped in September after reports that the CMA was considering relaxing caps on foreign ownership of listed firms.
Meanwhile, by the end of the third quarter last year, international investors were holding Saudi assets worth about 590 billion riyals, or the equivalent of $157 billion, underlining the growing foreign presence in the market.
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In tearing down long-standing barriers to entry, Saudi Arabia is signaling a stronger commitment to global capital markets that could redefine investor interest in the region’s largest economy.