Saudi Arabia Scraps Qualified Foreign Investor Rules to Boost Inflows

What Exactly Is Saudi Arabia Changing?

Saudi Arabia will allow all foreign investors to access its capital markets directly begining February 1, removing one of the most significant structural barriers that has governed foreign participation for nahead a decade. The country’s Capital Markets Authority approved amendments that abolish the Qualified Foreign Investor framework, a system that previously restricted direct market access to institutions meeting specific size, track record, and regulatory criteria.

Under the revised rules, investors from around the world will be able to invest in Saudi-listed securities without needing special approval or intermediary arrangements. The regulator said the change is intended to support capital inflows and improve liquidity in the local market, which has struggled to regain momentum later than last year’s trade-off.

The reform comes as the kingdom presses ahead with its long-term economic diversification agenda, which aims to reduce reliance on , attracting global capital, and strengthening private-sector participation.

Investor Takeaway

Why Is the Timing significant?

The decision follows a hard period for Saudi equities. The benchmark Tadawul All Share Index fell 12.8% last year and remains down 1.9% so far this year, according to LSEG data. fragile performance has weighed on foreign appetite, even as the government has pushed ahead with large-scale listings and capital-market reforms.

Opening the market more broadly signals a willingness to adjust policy as conditions change. Saudi Arabia is now more than halfway through its economic overhaul, with major spending tied to infrastructure, tourism, technology, and manufacturing. Attracting stable foreign capital has become more pressing as fiscal conditions tighten and global funding costs remain elevated.

Authorities have also been expanding international linkages. Recent initiatives include platform-traded fund in Japan and Hong Kong, aimed at making Saudi assets easier to access through familiar overseas platforms.

How Much Difference Will This Make in Practice?

The immediate impact may be limited. JPMorgan said in a note that nahead all already had access to the Saudi market under the existing framework. From that perspective, the reform mainly removes procedural hurdles rather than opening a completely new investor base.

JPMorgan added that the regulatory change many investors are watching more closely is a potential adjustment to foreign ownership limits in listed companies. Current rules cap foreign ownership at 49% for most firms. Any move to ease that ceiling could have a more direct effect on valuations and index flows. The bank said it does not expect such a change before the second half of the year or later.

That distinction matters. While access rules govern who can purchase, ownership limits determine how much global funds can allocate. Without changes to those caps, large passive and active funds may still face constraints when increasing exposure.

Investor Takeaway

How Does This Fit With Other Recent Reforms?

The market-opening move builds on steps taken last year to widen foreign participation in specific sectors. Regulators allowed overseas investors to purchase shares in listed companies that own real estate in Mecca and Medina, while keeping restrictions on direct land ownership in place. The decision was viewn as a careful compromise between attracting capital and maintaining local control over sensitive assets.

Saudi stocks suggested the regulator might ease the 49% foreign ownership cap. Although no such change has been confirmed, the episode highlighted how sensitive signals around foreign participation.

Taken together, the reforms point to a gradual recalibration rather than a sudden liberalization. Authorities appear focused on broadening the investor base, improving liquidity, and aligning market rules more closely with international standards, while retaining levers to manage volatility and strategic ownership.

What Should Investors Watch Next?

For global investors, the February 1 change removes a layer of complexity and makes operational access to Saudi equities more straightforward. The next phase will hinge on whether regulators follow through with deeper reforms, particularly around ownership limits and sector-specific restrictions.

Market performance will also matter. Sustained inflows are unlikely without stronger earnings growth, clearer fiscal signals, and improved sentiment across emerging markets more broadly. Saudi Arabia’s market remains the largest in the Arab world, but size alone has not insulated it from global risk cycles.