Saudi Arabia's Stock Market as a Strategic Destination for Foreign Capital

Saudi Arabia’s stock market has emerged as a compelling destination for foreign capital, driven by a wave of structural reforms and the broader ambitions of Vision 2030. In 2024, the Kingdom recorded a historic $58.1 billion in net foreign investments, a 10.1% increase from the previous year, signaling growing global confidence in its financial system [2]. This surge reflects the impact of regulatory overhauls, including the introduction of a registration-based investment regime in August 2024, which replaced the cumbersome licensing system and streamlined entry for foreign investors [5]. The reforms, overseen by the Ministry of Investment (MISA), now allow 100% foreign ownership in most sectors and reduce bureaucratic hurdles through a “single window” registration process [6].

The Tadawul All Share Index, however, remains a puzzle. Despite robust inflows, the index traded at a 32% discount to the MSCI ACWI Index in July 2025, highlighting persistent challenges such as low liquidity and volatility caps [3]. Analysts argue that structural issues—including limited corporate disclosure and sector concentration—continue to deter long-term engagement [3]. Yet, the reforms under Vision 2030 are addressing these gaps. Improved corporate governance standards, enhanced privatization pipelines, and the introduction of Saudi depositary receipts (enabling foreign firms to issue local receipts) are fostering a more transparent and competitive market [4].

The economic fundamentals further bolster the case for foreign investment. Non-oil GDP reached SAR 1,889 billion in 2024, with the private sector contributing 45% of GDP—a figure set to rise to 65% by 2030 [1]. The IMF has praised Saudi Arabia’s resilience, noting its strong fiscal buffers and low debt levels, which make it one of the most attractive emerging markets [1]. Meanwhile, the National Investment Strategy aims to attract $100 billion in annual foreign direct investment (FDI) by 2030, a target now within reach given the 2024 inflow of $58.1 billion [3].

Recent data underscores this momentum. In late August 2025, foreign investors accounted for 41% of total Saudi equities buying, one of the highest ratios on record [2]. This surge coincided with reforms easing restrictions on Gulf Cooperation Council (GCC) investors and expanding market access through instruments like depositary receipts [2]. While the broader market remains volatile, the reforms have already enhanced liquidity and competitiveness, with foreign ownership in equities surpassing $105 billion as of June 2025 [4].

Critics caution that structural bottlenecks persist. A Bloomberg analysis notes that Saudi stocks still lag due to governance gaps and regulatory constraints [3]. Yet, the pace of reform suggests these challenges are being systematically addressed. The 2024 Investment Law, set to take effect in February 2025, ensures equal treatment for local and foreign investors, while the Capital Market Authority’s focus on transparency aims to build long-term trust [5].

For foreign investors, the calculus is shifting. Saudi Arabia’s stock market offers not only access to a $1.2 trillion economy but also a strategic foothold in the GCC’s evolving financial landscape. As the Kingdom transitions from oil dependence to a diversified, globally integrated economy, the Tadawul is becoming a barometer of regional growth. The question is no longer whether Saudi Arabia can attract capital, but how quickly it can transform its market into a sustainable hub for global investment.

Source:
[1] Saudi Arabia: Concluding Statement of the 2025 Article IV Mission, [https://www.imf.org/en/News/Articles/2025/06/25/saudi-arabia-concluding-statement-of-the-2025-article-iv-mission]
[2] Foreign Investors Are Making a Bigger Bet on Saudi Stocks, [https://www.bloomberg.com/news/articles/2025-09-05/foreign-investors-are-making-a-bigger-bet-on-saudi-stocks]
[3] Saudi Stocks Needs More Than Foreign Money to Rise, [https://www.semafor.com/article/08/13/2025/saudi-stocks-needs-more-than-foreign-money-to-rise]
[4] Foreign Ownership in Saudi Equities Tops $105bn Despite..., [https://www.arabnews.com/node/2604781/%7B%7B]
[5] Saudi Arabia: Major Changes to Foreign Investment Regime with New Investment Law, [https://www.hfw.com/insights/saudi-arabia-major-changes-to-foreign-investment-regime-with-new-investment-law/]