Saudi Arabia Considers Easing Foreign Ownership Limits to Boost Stock Market

In a significant move to bolster its struggling stock market, Saudi Arabia is reportedly considering easing restrictions on foreign ownership of its listed companies. The total market capitalization of Saudi-listed companies is approximately 19 trillion yuan. For many years, Saudi Arabia has maintained strict limits on foreign ownership of its listed companies, typically capping it at 49%. This policy has been a contentious issue, with critics arguing that it hinders the inflow of foreign capital and limits the growth potential of Saudi companies. The potential relaxation of these restrictions could attract a substantial influx of foreign investment, potentially revitalizing the Saudi stock market.

This development comes at a critical time for Saudi Arabia, as the region continues to grapple with economic challenges exacerbated by global market volatility. The move aligns with Saudi Arabia's broader economic reforms, aimed at diversifying its economy away from oil dependence and fostering a more dynamic and open financial sector. The potential easing of foreign ownership limits is expected to enhance market liquidity and attract a broader range of international investors, thereby supporting the long-term growth and stability of the Saudi stock market.

On September 24, the Saudi stock market experienced a significant surge, with the Saudi All Share Index (TASI) rising by over 5% during intraday trading. The banking sector led the rally, with the banking index surging by more than 9%. Several major banks, including Saudi National Bank and Saudi Tadawul Holding, reached their daily trading limits. This sudden surge in the stock market was attributed to reports that Saudi Arabia is considering easing restrictions on foreign ownership of its listed companies.

If implemented, this policy change would mark a significant shift in Saudi Arabia's approach to foreign investment. Currently, foreign investors are limited to owning up to 49% of any listed company. By lifting this cap, Saudi Arabia could attract more foreign capital, potentially increasing its weight in global indices such as the MSCI Emerging Markets Index. This, in turn, could lead to increased investment from passive and active fund managers who track these indices.

The potential easing of foreign ownership limits is part of a broader effort by Saudi Arabia to revitalize its stock market, which has been struggling due to geopolitical tensions, stagnant oil prices, and adjustments in public spending. The Saudi stock market has underperformed compared to other emerging markets, with the TASI index down by 9.6% year-to-date. In contrast, the MSCI Emerging Markets Index has risen by 25% in dollar terms.

Despite these challenges, Saudi Arabia's stock market has been attracting more foreign investment due to its market reforms and relatively low valuations. The country is implementing its "Vision 2030" economic transformation plan, which aims to reduce its dependence on oil and attract more foreign investment. The potential easing of foreign ownership limits could further boost foreign investment in the Saudi stock market, particularly from passive investors who track global indices.

In addition to the potential easing of foreign ownership limits, Saudi Arabia has been making progress in diversifying its economy away from oil. Recent data from the Saudi General Authority for Statistics (GASTAT) shows that non-oil exports grew by 17.8% in the second quarter of 2025, offsetting a decline in oil sales. This shift in export structure reflects Saudi Arabia's efforts to reduce its reliance on oil and develop other sectors of its economy.

The Saudi Ministry of Finance reported that non-oil revenues accounted for nearly half of the government's total revenue in the second quarter of 2025. This marks a significant milestone in Saudi Arabia's efforts to diversify its economy and reduce its dependence on oil. The increase in non-oil revenues was driven by higher tax collections, including value-added tax and corporate income tax. This growth in non-oil revenues helped to offset a decline in oil revenues, which fell by 29% year-over-year.

Overall, the potential easing of foreign ownership limits in Saudi Arabia's stock market, combined with the country's broader economic reforms, could attract more foreign investment and support the long-term growth and stability of the Saudi stock market. This development aligns with Saudi Arabia's efforts to diversify its economy and reduce its dependence on oil, positioning the country for sustained economic growth in the years to come.