A leadership change at Saudi Arabia's capital markets regulator has rekindled optimism among investors and bankers, who anticipate a renewed push toward market liberalization—particularly the long-awaited relaxation of foreign ownership caps that could channel billions of dollars into the kingdom's stock exchange.
Earlier this month, Mazen Al-Sudairi, formerly the head of research at Al Rajhi Bank and an advisor to the Cabinet Secretariat, was appointed chairman of the Capital Market Authority (CMA), succeeding Mohammed ElKuwaiz, who had led the body for nearly a decade. According to sources familiar with the matter, Al-Sudairi's capital markets experience at some of Saudi Arabia's largest banks, combined with his close government ties, has fueled expectations that he may drive further deregulation.
Morgan Stanley strategist Matthew Nguyen noted that the regulatory shake-up has brought potential reforms to foreign ownership rules back into focus. In a report dated August 17, Nguyen highlighted that Saudi Arabia's current 49% cap on foreign ownership makes it the last major Gulf market to retain such restrictions. Morgan Stanley estimates that partially raising the limit to 75% could attract roughly $4.3 billion in passive inflows to the Saudi stock market, while a complete removal of the cap might draw in approximately $7.4 billion.
However, Nguyen added that the window for implementing reforms this year is narrowing, as any changes would need to take effect by late October to be considered in MSCI's November global equity index review. The Saudi stock exchange, the largest in the Gulf region, stands to benefit from greater foreign participation, which would not only attract overseas capital but also deepen market liquidity—aligning with Crown Prince Mohammed bin Salman's vision of developing financial markets to support an ambitious economic diversification agenda and reduce reliance on oil revenue.
Expectations for relaxed foreign ownership rules surged in February when Saudi Arabia opened direct stock trading to all foreign investors, but momentum has since stalled, with geopolitical tensions adding further pressure. The kingdom, which boasted a red-hot IPO market until early last year, has seen a sharp slowdown in equity issuance. The benchmark index is still up about 5% year-to-date, yet only two main-market IPOs have occurred this year, each raising less than $100 million. Meanwhile, a major listing plan by a contractor was shelved due to regional conflict.
Even before the conflict erupted, the Saudi exchange had witnessed a series of weak market debuts, with some companies postponing their planned offerings. Al-Sudairi also serves as an external member of the investment committee of the Public Investment Fund (PIF), the sovereign wealth fund managing $1 trillion in assets, which plans to list more companies under its new five-year strategy. Al-Sudairi will enjoy ministerial-level status, with his appointment announced during a cabinet reshuffle earlier this month.
Beyond foreign ownership limits, bankers and investors are hoping the new leadership will advance broader reforms to reinvigorate the listing market while boosting liquidity and trading volumes. Earlier this year, bankers urged the CMA to revisit guidance encouraging Saudi issuers to allocate up to 30% of IPO shares to retail investors, arguing that excessive allocation to individuals poses policy risks amid weak retail demand. Similar concerns were raised regarding guidance pushing issuers to allocate large portions of IPO shares to mutual funds.
Sources indicated that investment bankers are worried about a growing backlog of companies awaiting regulatory approval, with only a handful receiving the green light each quarter. Financial executives have also expressed frustration over the six-month window for listing after approval, which can force companies to proceed with offerings under unfavorable market conditions or risk their approvals expiring and requiring a fresh application. Additionally, relations between the capital markets community and regulators have come under strain, as the CMA investigates several banks over companies whose first post-listing earnings failed to meet profit expectations, contributing to lackluster IPO performance.