Saudi Arabia's decision to open its capital market to all categories of foreign investors this week is the latest step in its goal of boosting capital inflows and encouraging market activity.
The kingdom, the Arab world's largest economy, is focusing on a more inclusive and open strategy, aligned with the goals of its Vision 2030.
“Saudi Arabia has focused on unlocking private-sector growth, expanding global partnerships and creating a more competitive and transparent business environment,” analysts at Dubai-based consultancy Sovereign PPG said.
The regulatory modernisation is “improving transparency, streamlining processes and aligning frameworks with international standards”.
Open stock market
On Tuesday, the Capital Market Authority said it will allow people from overseas to invest directly in the market for the first time – the latest in a string of stock market moves meant to expand Saudi Arabia's investor base.
The decision, effective from February 1, eliminates the concept of the Qualified Foreign Investor in the main market, allowing all categories of overseas investors access without the need to meet former qualification requirement, the regulator said.
With the Tadawul falling about 13 per cent last year and underperforming, “the timing matters … [as] foreign inflows are no longer optional – they are needed”, said Ahmed Saidali, founder and chairman of Dubai-based investment advisory Redwood Heritage Group.
On Wednesday, a day after the announcement, Tadawul trading surged, with turnover exceeding 1.5 billion Saudi riyals ($400 million) in the first 30 minutes.
“Ultimately, for any index to be able to compete globally and become more attractive, it needs to be able to attract the best companies to come and consider it for this thing,” Rawan Baddour, co-founder of UAE-based financial services company Zest Equity, told The National.
However, this accessibility should not be confused with guaranteed opportunity, as Saudi Arabia is still in the middle of a complicated transition away from oil dependence, and that transition is seen as uneven, said Irina Tsukerman, a geopolitical analyst in New York.
“Some sectors are benefiting from reforms, population growth and rising domestic consumption, while others remain closely tied to state spending cycles and energy revenue. Market volatility over the past year reflects this reality,” she told The National.
Tuesday's announcement followed the CMA's approval of a regulatory framework to allow non-residents to invest directly in the main market, which came in October.
The move allowed those investors to expand their activity across its capital markets and continue trading in listed companies on the main Saudi stock market, even if they left the Gulf, the CMA had said at the time.
This marks a change from their previous restrictions, which limited securities activity to debt instruments, investment funds, derivatives, and the parallel Nomu market, designed for SMEs and start-ups that did not meet the main market’s stringent listing requirements.
Earlier, in July, Saudi Arabia opened its stock exchange to Gulf residents, aiming to boost participation and attract more investment.
Deepak Mehra, chief economist at Commercial Bank of Dubai, said it was a “good decision for the stock market and the investors. Saudi Arabia has some fantastic companies with world-class scales and operations”.
Analysts also anticipate robust initial public offering activity in the kingdom this year, following a regional slowdown last year. The CMA was reviewing 40 IPO applications at the end of last year, positioning the Tadawul for 20 to 30 executions this year from strong private company interest. There, however, remain challenges.
The Saudi market remains strongly influenced by the state, with many of the largest and most visible companies depending on government policy, contracts, or strategic direction – and opening the market does not change this underlying structure, Ms Tsukerman said.
She noted that it can be difficult to distinguish between commercial decisions and national objectives. For investors, this means that strong revenue do not always lead to shareholder-focused outcomes, and changes in government policy can be as significant as shifts in market demand.
Ms Tsukerman added that although governance and transparency have improved, they are still developing. Reporting standards, consistency, and protection of minority shareholders are not always as reliable as in more established markets.
“Large institutional investors can manage this through scale and expertise, but smaller investors may find it harder to assess risk. In simple terms, not everything is hidden, but not everything is fully clear either. That uncertainty is part of the cost of investing in a transitioning economy.”
Bond sales and securities
Saudi Arabia approved its 2026 budget last month and its borrowing plan signalled a slowdown in the growth of international bond issuance, as the kingdom adopts a more cautious approach to spending amid lower oil prices, analysts say.
Riyadh's cautious language around reflects a conscious effort to avoid overextending at a time when global borrowing costs are higher and financial conditions are less forgiving, Ms Tsukerman said.
The approach also clarifies an important distinction in the investment landscape: Engaging directly with large, state-backed entities means accepting a different logic of returns. These organisations often pursue long-term national objectives, geopolitical positioning, or strategic industrial development. Financial performance is only one consideration among many. Timelines can be long, transparency uneven, and outcomes shaped by policy decisions rather than market competition. For most private investors, this is closer to participating in a national development agenda than making a traditional investment.
The kingdom is also reportedly working on a new investment plan that would be the second phase of its National Investment Strategy, said Khalid Al Falih, Investment Minister, at this week's Shoura Council meeting.
