ECONOMY

SAUDI’S NEW CAPITAL MARKET RULES TO BOLSTER FOREIGN INVESTMENT

In order to expand the Saudi Exchange’s (Tadawul) investors base, the Capital Market Authority (CMA) approved a set of amendments aimed at facilitating the procedures for opening investment accounts for various categories of investors. 

The efforts are part of the draft to amend the "Investment Accounts Instructions, the Rules for Foreign Investment in Securities, and the Capital Market Institutions Regulations.”

The approval in June of this updated regulatory framework marks a strategic eort to keep pace with Saudi Arabia’s evolving regulatory landscape and rapid technological advancements. It is designed to encourage greater investment in the Saudi capital market by streamlining the procedures for opening investment accounts, introducing new investor categories, and regulating the activities associated with these accounts. These amendments are anticipated to boost the market’s appeal to both local and foreign investors, raise investor protection standards, and reinforce confidence among market participants. 

INVESTOR FRIENDLY REFORMS

A central feature of the approved framework is the expansion of eligibility criteria for individual foreign investors residing in GCC countries. The amendments revise the requirements for opening investment accounts and significantly broaden the range of securities accessible to these investors.

Under the new rules, such investors can now directly invest in shares listed on the Main Market. This marks a major shift from previous restrictions, which limited their investment activity to the debt market, the parallel Nomu market, investment funds, and the derivatives market. Previously, their access to the Main Market was only possible through indirect channels – namely swap agreements or by acting as clients of capital market institutions where investment decisions were made on their behalf.

The expansion is expected to draw more foreign capital into the kingdom, increase market liquidity, and support overall economic development. By providing a direct investment route, the reforms aim to position the Saudi capital market as more competitive, accessible, and aligned with global best practices.

In a further step to retain investment ties, the amendments allow individual foreign investors who previously resided in Saudi Arabia or one of the GCC states to continue using their investment accounts and participate in Main Market share trading – even after their residency has ended. 

The move dovetails with the International Monetary Fund (IMF) recommendation to deepen the capital market to help diversify funding and reduce reliance on bank financing.

“Although the capital market remains dominated by the large government-related issuers and the trading volumes are low, the recent and ongoing initiatives, such as the Investment Law that came into effect in February 2025 and the ongoing pension and savings reforms, should improve market liquidity and increase foreign participation in the Saudi capital markets,” the IMF said in its latest assessment of the country. 

INVESTMENT FUND REGULATIONS

Also in June, CMA approved a set of enhancements aimed at developing the regulatory environment for investment funds in Saudi Arabia. This includes amendments to the Investment Funds Regulations, the Real Estate Investment Funds Regulations, and the Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority. 

The amendments approved by the CMA board aim to develop a regulatory framework for investment funds, enhance the asset managementindustry, and strengthen its competitiveness by identifying areas for improvement and adopting global best practices. The amendments also include additional regulatory provisions that support the growth of the investment fund and real estate investment fund sectors, enhance transparency and disclosure for fund unit holders, and establish governance standards that ensure greater protection of investors' rights. 

On the debt market side, the market value has doubled to SAR 800 billion since 2019, according to CMA. Despite this expansion, the debt market remains under 20% of the Saudi economy, offering significant room for further development.

Over the past few years, the debt market has seen a broad range of investors, including funds, insurance companies, and other specialised entities. The next phase in the debt market's development would focus on encouraging greater foreign investment by joining more global indices and expanding the market's scope beyond regulatory changes. The current favourable conditions in Saudi Arabia’s debt market make it an attractive option for foreign investors, particularly compared to the stock market. 

MARKET PERFORMANCE

The Saudi Exchange All Share Index, the Middle East region’s largest index by market capitalisation, is down 7.2% for the first six months of the year to reach 11,163 points. The market had risen 0.6% last year. 

The Saudi Exchange also saw strong growth in new listings, valued at USD 1.1 billion in the first quarter of 2025, accounting for 69% of total IPO proceeds in the Gulf region. 

“This strong performance stems from three main market listings and momentum on the Nomu parallel market, where six listings raised an additional USD 62 million, reinforcing the kingdom’s role as a regional engine of capital markets development,” according to EY, a management consultancy, which tracked the numbers.

Last year, CMA approved 60 companies for initial public offerings, while a total of SAR 13.2 billion was raised by companies, according to CMA data.