Saudi Arabia to lift ban on full foreign ownership: Why it's groundbreaking

25/09/2025 04:25 AST

For years, foreign investors could only own a minority share of companies in Saudi Arabia. That may be about to change soon. Regulators are signaling that restrictions could soon be lifted - a shift with the potential to reshape the region's financial landscape.

Markets reacted instantly. On Wednesday, Saudi stocks added $123 billion in value after Bloomberg reported the kingdom may let foreigners hold majority stakes in listed companies - a sign that global capital could soon flow more freely into Riyadh.

Bloomberg cited a board member of the kingdom's Capital Market Authority saying majority foreign ownership could come into effect before the end of the year. Every industry group traded higher on the news.

While this might look like just another market rally, the implications run deeper. Foreign ownership is currently capped at 49%. Lifting that ceiling would unlock billions in potential investment and mark a pivotal moment for Saudi Arabia's economy and its role in global finance.

Analysts at JPMorgan and EFG Hermes estimate that foreign inflows could reach $10 billion each, with banks like Al Rajhi, Saudi National Bank, and Alinma positioned to benefit the most. For instance, Al Rajhi's stock jumped 10% immediately after the news, reflecting investor optimism.

Why is this significant?
For decades, Saudi Arabia's economy has relied heavily on oil exports. Crown Prince Mohammed bin Salman has long emphasized diversifying the economy, building a thriving financial market, and making Saudi Arabia a hub for global investment.

Allowing majority foreign ownership is a key step toward achieving that vision. It signals openness, attracts long-term international investors, and aligns the kingdom with other Gulf peers, such as the UAE, which permits 100% foreign ownership across sectors.

The move also has global market implications. Saudi Arabia is currently underrepresented in key indexes like MSCI Emerging Markets. Easing restrictions could increase the kingdom's weight from 3.3% to around 4%, attracting index funds and other passive investments that track these benchmarks. Over time, this could boost liquidity, improve corporate governance, and encourage more Saudis to list businesses publicly.

For the average investor, it's a reminder that policy shifts can dramatically affect markets. For Saudi Arabia, it's a strategic step toward transforming its economy, building a deep and resilient capital market, and showing the world it is serious about welcoming global investment.

In short, allowing foreigners to take majority stakes is not just about stocks-it's about opening the kingdom's doors to global capital, expertise, and influence, helping Saudi Arabia secure a stronger, more diversified economic future.

Gulfnews