Raising the Foreign Ownership Cap in Saudi Listed Companies: A Big Step Toward a More Global Market
Saudi Arabia is preparing a major legal change that could reshape its capital market. For the first time, foreign investors may be allowed to own more than 49% of listed companies. This change is expected to be approved before the end of 2025. But this isn’t just a small rule update it’s a big shift in how ownership and control are handled in Saudi public companies.
This move supports the Kingdom’s Vision 2030 goals by opening the market to more global investors, bringing in new capital, and making the Saudi stock market more competitive worldwide.
- Background: From Limits to Openness
Saudi Arabia has a long history of welcoming foreign investment but with limits to protect local control. The original Foreign Investment Law, passed in 1955, required that Saudis hold at least 51% of any business. This kept control in local hands while still allowing foreign involvement.
In 2003, the Capital Market Authority (CMA) was created to regulate the stock market, protect investors, and promote good corporate behavior. In 2015, foreign investors were allowed to buy shares in Saudi companies, but only up to 49% per company.
Now, that cap is about to change. According to CMA board member Abdulaziz bin Mohsen bin Hassan, the authority is nearly ready to approve this shift, which could allow foreigners to own more than half of a company unless the company operates in a strategic sector like oil, defense, or telecoms.
To support this, several rules will need to be updated, including:
- Rules on foreign investment in listed stocks
- Investment account guidelines
- Disclosure and corporate governance standards
These updates aim to ensure transparency, protect investors, and attract long-term capital.
- What Kind of Foreign Investment to Expect?
This isn’t just about allowing more ownership it’s about creating more space for foreign money to come into the market.
How does this lead to more investment?
When foreign ownership limits are raised, global indices like MSCI and FTSE recalculate Saudi Arabia’s share in their benchmarks. That triggers automatic buying from large funds that follow those indices. These passive funds must buy more Saudi stocks to match the new weights. Active investors also tend to buy ahead of time, trying to benefit from the price moves.
How much money are we talking about?
- J.P. Morgan estimates a full increase to 100% could bring in $10.6 billion
- EFG Hermes says even a partial increase could draw around $10 billion
For example, if a fund managing $100 billion sees Saudi’s weight in the index rise by just 0.3%, it may invest $300 million more into the market. Multiply that across many funds and the numbers add up fast.
Of course, actual results depend on several things final rules, sector exclusions, and how easily the market can absorb large orders.
III. Sectors Likely to Benefit the Most
Foreign investors don’t spread their money evenly. They focus on sectors with strong liquidity, stable earnings, and large weightings in global indices.
- Banking
Banks are expected to attract the most investment. They’re liquid, reliable, and well-represented in benchmarks. Early market reaction already showed banking stocks jumping by 10% in some cases. - Telecoms
Telecom companies offer stable cash flows and regular dividends. They’re seen as safe bets and naturally attract income-focused funds. - Insurance & Technology
These sectors may see a second wave of investment.- Insurance has improved transparency and compliance with global standards.
- Tech & Digital Services benefit from long-term digital trends, though they may see more gradual, measured investment due to higher market volatility.
- Other Sectors
Consumer goods, industrials, and services may benefit but only if they meet key conditions like sufficient liquidity, good governance, and open ownership space.
- What Legal and Regulatory Updates Are Needed?
Opening up ownership is not just a financial move it’s a legal and policy upgrade. Here’s what needs to happen:
- Stronger Reporting and Governance
With more foreign investors, companies must offer clearer financials, disclose who owns what, and maintain independent governance committees. ESG (environmental, social, governance) reporting will also become more important. - Protecting Key Industries
Sectors tied to national security (like oil and defense) should remain restricted. The government can use a “negative list” to keep control where needed. - Market Integrity Tools
With higher foreign activity, tools are needed to prevent manipulation and manage price swings. These include:- Volatility controls
- Real-time monitoring
- Stricter rules on insider trading
- Market makers and regulated short selling
- Handling Mergers and Takeovers
More foreign ownership means more chance of mergers or large stock purchases. The rules must ensure fairness to all shareholders and transparency during such events. - Phased Rollout
The change should happen in steps. This allows regulators and investors to adjust and track progress using key metrics like liquidity, trading spreads, and complaints.
- Why Now? The Bigger Picture
So far in 2025, the Saudi market has dropped around 9.6%, while the MSCI Emerging Markets Index has gained 25%. This gap reflects challenges like oil-price stability and slower government spending.
Allowing more foreign ownership is a smart way to close that gap, boost liquidity, and lower the cost of funding. It could also shift more companies toward using the stock market to raise capital rather than relying only on bank loans.
- Supporting Vision 2030
This reform isn’t a short-term fix. It fits squarely within Vision 2030, aiming to build deeper, more dynamic capital markets.
- More Funding for Innovation
A bigger investor base means better liquidity and lower financing costs helping new companies grow without depending only on banks. - Raising Governance Standards
Global investors demand transparency. Their presence pushes companies to raise the bar on reporting, risk management, and ESG practices. - Stronger Global Standing
Today, Saudi Arabia makes up about 3.3% of the MSCI EM index. Raising the cap boosts that share and pushes the market closer to “semi-advanced” status in the eyes of global investors.
Final Thoughts
Letting foreign investors own more than 49% of listed companies is a legal milestone, not just a financial one. It clarifies ownership rights, investor protections, and market rules in ways that can unlock real value.
To make this work, the regulatory framework must include:
- Clear reporting rules for large shareholdings
- Strong oversight of takeover activity
- A registry of ultimate owners
- A screening process for sensitive sectors
- Real-time market surveillance
- Transition rules to give companies time to adjust
Done right, this reform can make the Saudi market more open, more transparent, and more attractive while still protecting national interests and investor rights.