RIYADH: Foreign investors made net purchases of around SR5 billion ($1.33 billion) in Saudi stocks during January, coinciding with the announcement that the market would be opened to all categories of non-resident foreign investors — individuals and institutions from around the world — directly and without conditions.
According to the Financial Analysis Unit at Al-Eqtisadiah, January’s foreign buying represents the largest monthly purchases since 2022, excluding June 2024, when Aramco held a secondary offering, and September 2025, following a Bloomberg report that the Saudi Capital Market Authority, or CMA, would allow foreigners to hold majority stakes in listed companies.
Since the market-opening announcement on Jan. 6, Saudi stocks rose by about 10.6 percent by the end of the month. These results were accompanied by a rally in the banking sector, which is expected to benefit most from the lifting of ownership restrictions and strong fourth-quarter results.
Rising oil prices also supported increases in Aramco, the largest stock by weight on the Tadawul All Share Index, alongside gains in Maaden following new discoveries and higher gold prices, as well as SABIC, after news of asset sales in Europe and the Americas that had previously caused losses for the company.
The new amendments removed the regulatory framework for swap agreements, which had been used to allow non-resident foreign investors to gain only the economic benefits of listed securities and to enable direct investment in stocks listed on the main market.
Foreign purchases in January reflected buying by foreign investors who were already in the market ahead of the decision’s implementation in early February.
Foreign buying last month was likely driven by active funds. With the easing of restrictions, the market’s weight in emerging-market indices is expected to rise later, which could in turn attract additional inflows from passive funds that follow market and company weights in these indices.
The largest impact is expected on TASI’s weight in emerging-market indices, following the proposed increase in foreign ownership caps for listed companies, pending CMA approval.
Foreign investors accounted for around 41.7 percent of total market purchases in January, compared with just 5.6 percent in 2018, before joining emerging-market indices, highlighting their growing influence in the market.
With the market rally and foreign buying in January, the value of foreign investors’ holdings rose to SR465.5 billion, representing 4.87 percent of the total market and 12.67 percent of free-floating shares. Their influence also increased in terms of free-floating shares, rising from 11.01 percent at the end of 2024 to 12.4 percent by year-end.
The latest regulatory decision is expected to improve market liquidity over the long term, make stock valuations fairer, expand the investor base, deepen the market, and enhance overall efficiency.
Foreign investment rules in Saudi stocks
Foreign investments in Saudi stocks are currently subject to several restrictions, including that non-resident foreign investors, excluding strategic foreign investors, may not own 10 percent or more of the shares of any listed company or its convertible debt instruments.
Foreign investors — all categories, resident or non-resident, except strategic foreign investors — may not collectively hold more than 49 percent of any listed company’s shares or convertible debt.
These limits are in addition to any restrictions set out in companies’ bylaws, other statutory regulations, or instructions issued by the relevant authorities that apply to listed companies.
Source: www.arabnews.com