Saudi Arabia opens stock market to international investors
11 November 2025
Denton’s Nik Colbridge, partner, Middle East Corporate, and Ahmed Butt, partner, Middle East Banking and Finance, review room for growth following the Kingdom of Saudi Arabia’s move to relax foreign investment restrictions
Image: stock.adobe.com/Ayman
Saudi Arabia's Capital Market Authority (CMA) has indicated its consideration to relax foreign investment restrictions in Saudi-listed companies in a bid to boost liquidity.
The Saudi Stock Exchange, Tadawul, comprising the Main Market and the Nomu market, represents the ninth largest stock market by market capitalisation in the world.
It is the dominant market in the Gulf Cooperation Council (GCC) with an overall market cap — based on the combined value of all listed companies — of 9.126 trillion Saudi riyal (US$2.433 trillion) at the end of the first half of 2025.
While this may sound like small fry compared to leading global bourses such as the New York Stock Exchange, which had an overall market cap of US$31.7 trillion at the same point this year, it is nevertheless impressive for this relatively recent addition to the World Federation of Exchanges, and illustrative of Tadawul's room for growth.
Who can invest in Saudi stocks?
Under Saudi Arabia's Rules for Foreign Investment in Íø±¬³Ô¹Ï, only certain categories of foreign investors have historically been permitted to invest in shares listed on Tadawul.
These categories impose high eligibility thresholds on those outside Saudi Arabia looking to invest, with qualified foreign investors requiring assets of at least SAR1,875 million to buy shares.
By contrast, and not a precise parallel, sophisticated investor requirements under UK financial promotion exemptions impose a £1 million turnover threshold to buy shares in companies listed on the London Stock Exchange, and most foreign investors are treated largely the same as UK investors.
Foreign strategic investors in Saudi Arabia are obliged to undergo a qualification process which demonstrates their contribution to the issuer’s financial or operational performance. This route is available to pre-approved cornerstone or anchor investors, and therefore seemingly out of reach of ordinary investors.
Other categories are available for foreign investors, however these do not allow direct shareholdings — for example, foreign ultimate beneficiaries fronted by swap agreements with a local capital markets institution, and foreign persons whose holding is through a discretionary investment portfolio managed by a locally regulated entity.
All of the above categories of foreign investor (excluding strategic investors) are collectively capped at 49 per cent Saudi-listed stocks and, individually, at 10 per cent of the issued shares or debt of any listed company.
As a result of these restrictions, Tadawul IPOs, and liquidity generally, are predominantly locally driven.
Only around 11-13 per cent of shares are held by overseas investors, with a small proportion of this figure represented by overseas institutional investors.
Opening the door
In line with Saudi Arabia's Vision 2030 aspirations to grow its economy, the government has expressed an interest in relaxing some of its rules on foreign participation in its stock market to help inject more money into Saudi businesses.
Moves to loosen restrictions on foreign capital began in May 2025, when the CMA permitted foreign natural persons residing in one of the GCC member states, or having resided in one of the GCC member states and having opened an investment account in Saudi Arabia during that time, to also invest in listed shares on the Main Market, subject to the general restrictions on foreign investors.
In September 2025, the CMA hinted at its plans to go further, with CMA board member Abdulaziz Abdulmohsen Bin Hassan going on record to say the authority wants to further loosen ownership restrictions.
While it was reported that Saudi Arabia might scrap the 49 per cent cap on foreign ownership of Saudi-listed stocks, the move under immediate consideration appears in fact to be confined to changes to the rules covering who can invest within this limit. This is still a significant move, and market activity surged after the plan was mooted.
Under the proposed changes, all foreign investors will be eligible to buy securities (not just qualified foreign investors or resident expats), although the 10 per cent limit on how many shares foreign investors can hold in individual issuers remains in place.
Saudi Arabia is banking on significant international interest in Saudi-listed shares, particularly exposure to some of its major energy companies, and expects the rule change to drive further demand and add to overall liquidity, both through active shareholder participation and through additional passive trading brought by increased weighting within the relevant share indices.
Although the change still requires approval from other government bodies, Bin Hassan said he expects the decision to come into effect before the end of 2025.
For listed and pre-IPO Saudi Arabia-based companies, this relaxation of foreign investment rules provides an incentive for them to market their shares to an international audience and, in particular, institutional investors whose mandates allow them to participate in this market.
The Saudi Stock Exchange, Tadawul, comprising the Main Market and the Nomu market, represents the ninth largest stock market by market capitalisation in the world.
It is the dominant market in the Gulf Cooperation Council (GCC) with an overall market cap — based on the combined value of all listed companies — of 9.126 trillion Saudi riyal (US$2.433 trillion) at the end of the first half of 2025.
While this may sound like small fry compared to leading global bourses such as the New York Stock Exchange, which had an overall market cap of US$31.7 trillion at the same point this year, it is nevertheless impressive for this relatively recent addition to the World Federation of Exchanges, and illustrative of Tadawul's room for growth.
Who can invest in Saudi stocks?
Under Saudi Arabia's Rules for Foreign Investment in Íø±¬³Ô¹Ï, only certain categories of foreign investors have historically been permitted to invest in shares listed on Tadawul.
These categories impose high eligibility thresholds on those outside Saudi Arabia looking to invest, with qualified foreign investors requiring assets of at least SAR1,875 million to buy shares.
By contrast, and not a precise parallel, sophisticated investor requirements under UK financial promotion exemptions impose a £1 million turnover threshold to buy shares in companies listed on the London Stock Exchange, and most foreign investors are treated largely the same as UK investors.
Foreign strategic investors in Saudi Arabia are obliged to undergo a qualification process which demonstrates their contribution to the issuer’s financial or operational performance. This route is available to pre-approved cornerstone or anchor investors, and therefore seemingly out of reach of ordinary investors.
Other categories are available for foreign investors, however these do not allow direct shareholdings — for example, foreign ultimate beneficiaries fronted by swap agreements with a local capital markets institution, and foreign persons whose holding is through a discretionary investment portfolio managed by a locally regulated entity.
All of the above categories of foreign investor (excluding strategic investors) are collectively capped at 49 per cent Saudi-listed stocks and, individually, at 10 per cent of the issued shares or debt of any listed company.
As a result of these restrictions, Tadawul IPOs, and liquidity generally, are predominantly locally driven.
Only around 11-13 per cent of shares are held by overseas investors, with a small proportion of this figure represented by overseas institutional investors.
Opening the door
In line with Saudi Arabia's Vision 2030 aspirations to grow its economy, the government has expressed an interest in relaxing some of its rules on foreign participation in its stock market to help inject more money into Saudi businesses.
Moves to loosen restrictions on foreign capital began in May 2025, when the CMA permitted foreign natural persons residing in one of the GCC member states, or having resided in one of the GCC member states and having opened an investment account in Saudi Arabia during that time, to also invest in listed shares on the Main Market, subject to the general restrictions on foreign investors.
In September 2025, the CMA hinted at its plans to go further, with CMA board member Abdulaziz Abdulmohsen Bin Hassan going on record to say the authority wants to further loosen ownership restrictions.
While it was reported that Saudi Arabia might scrap the 49 per cent cap on foreign ownership of Saudi-listed stocks, the move under immediate consideration appears in fact to be confined to changes to the rules covering who can invest within this limit. This is still a significant move, and market activity surged after the plan was mooted.
Under the proposed changes, all foreign investors will be eligible to buy securities (not just qualified foreign investors or resident expats), although the 10 per cent limit on how many shares foreign investors can hold in individual issuers remains in place.
Saudi Arabia is banking on significant international interest in Saudi-listed shares, particularly exposure to some of its major energy companies, and expects the rule change to drive further demand and add to overall liquidity, both through active shareholder participation and through additional passive trading brought by increased weighting within the relevant share indices.
Although the change still requires approval from other government bodies, Bin Hassan said he expects the decision to come into effect before the end of 2025.
For listed and pre-IPO Saudi Arabia-based companies, this relaxation of foreign investment rules provides an incentive for them to market their shares to an international audience and, in particular, institutional investors whose mandates allow them to participate in this market.
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