Foreign-held equities soar ahead of Saudi Exchange reforms

• Value of foreign-held shares up 12%
• QFI system replaced on February 1
• Ownership limits also set to change

Foreign investors poured money into the Saudi Exchange in January, delivering the largest monthly inflow by value ahead of changes to foreign ownership rules.

The value of foreign-held shares jumped 12 percent over the month, reaching $124.1 billion on January 29, according to data released by the exchange.

Foreign investors now hold nearly 13 percent of free floating shares on the exchange and 4.9 percent of the total shares of listed companies. This is the highest proportion since Saudi Aramco’s record-breaking initial public offering in 2019.

The total value of the market grew by 8.5 percent last month, reaching $2.55 trillion and recovering some of the losses of 2025, when it fell by almost 13 percent.

The market rally accounts for the bulk of the increase in foreign-held shares. But January’s figures also include $1.3 billion of fresh net foreign inflows, mostly from existing investors.

“The market has been really good at the start of this year,” said Shahrukh Saleem, a portfolio analyst at asset manager Mashreq Capital. “If they move towards removing foreign ownership limits, that can increase liquidity.”

Reforms that lower restrictions on foreign investors came into effect at the start of February, replacing the qualified foreign investors (QFIs) system.

Also in the works are plans to raise the limits on foreign ownership. The Saudi Capital Markets Authority has indicated that it hopes to make that change this year, although it has not yet given a date. 

These reforms could allow Saudi stocks and the exchange itself to take a larger weighting on international benchmarks such as the MSCI emerging markets index. MSCI’s next quarterly review will be held on Wednesday, February 11. If successful, it could create the potential for higher passive flow incomes. 

QFIs accounted for almost 97 percent of fresh inflows in January, suggesting that existing investors looked to increase their position ahead of implementation of the reforms. 

“Markets don’t actually move on news,” said Mohanad Yakout, senior markets analyst at Scope Markets. “They move on expectations of what will happen.”

• High hopes as Saudi exchange prepares to welcome foreigners
• Opinion: Saudi Arabia bets on capital markets as foreign ownership limits fall
• Egypt to raise $2bn from global bond markets, minister says

The Saudi Exchange has not yet released foreign investor data for the first week of February, but analysts suggest the impact of the QFI reforms may not be felt right away.

“We did not see a big jump in trading volume over this week versus the last month or the last few months, which I would say makes sense,” said Alistair Byas-Perry, head of capital markets at digital assets company 21shares.

“It’s not that you open the pipe and straight away see investors rushing into the market.

“You are building the rails for investors to access the Saudi market. So, I think it’s going to build up in the long term, with more asset managers and more retail investors accessing the market.”