Breaking the Deadlock or Reshaping the Rules? Saudi Capital Market Regulator Changes Leadership, Investors Hope for Eased Foreign Investment Restrictions and Revised IPO Rules

Wisdom Finance APP has noted that senior management changes at Saudi Arabia’s Capital Market Authority have rekindled hope among investors and bankers, with the market anticipating that Saudi Arabia may further liberalize its market, including easing foreign ownership limits—a long-awaited move that could attract billions of dollars into the country’s stock market.

Earlier this month, former head of research at Alrajhi Bank and cabinet secretariat advisor Mazen Al-Sudairi was appointed chairman of the Saudi Capital Market Authority (CMA), succeeding Mohammed ElKuwaiz, who had led the authority for nearly a decade.

According to sources, Al-Sudairi has built up capital markets experience at several large Saudi banks and has close government ties, leading investors to expect he may drive further loosening of regulations in the market.

Morgan Stanley strategist Matthew Nguyen stated that the leadership change at the regulator has brought potential reforms to foreign ownership rules back into focus. In an August 17 report, Nguyen noted that Saudi Arabia currently maintains a 49% cap on foreign ownership, making it the last major market in the Gulf region to retain such limitations.

Morgan Stanley estimates that if the limit is partially relaxed to 75%, Saudi stocks could see about $4.3 billion in passive capital inflows; complete removal of the cap could attract roughly $7.4 billion. Nguyen added, however, that the window for reforms this year is narrowing, as any move must take effect by late October to be included in the MSCI global equity index review in November.

The Saudi Stock Exchange is the largest in the Gulf region. Easing foreign access can help Saudi Arabia lure more overseas capital and deepen market liquidity. This aligns with Crown Prince Mohammed bin Salman’s vision to develop financial markets and support his ambitious economic diversification agenda, reducing the nation’s reliance on oil revenue.

After Saudi Arabia opened direct stock trading to all foreign investors in February this year, expectations grew for a further relaxation of foreign ownership rules. However, momentum has since slowed as geopolitical conflicts added pressure to the market. Once a hotbed for new listings through early last year, Saudi’s IPO scene has now cooled significantly in terms of size.

The Saudi benchmark index has still risen about 5% so far this year. However, only two IPOs have occurred on the main board, with each raising less than $100 million. Meanwhile, a major contractor’s listing plan was stalled by regional conflict. In fact, even before the conflict, the Saudi exchange saw a series of weak IPO debuts, with some companies postponing their original listing plans.

Al-Sudairi is also an external member of the investment committee at Saudi’s sovereign wealth fund, the $1 trillion Public Investment Fund (PIF). PIF’s new five-year strategy calls for more listings. Al-Sudairi will have ministerial treatment, with his appointment announced during the cabinet reshuffle earlier this month.

Beyond foreign ownership limitations, bankers and investors hope new leadership will drive broader reforms, boosting market liquidity and trading volume while also revitalizing the IPO market.

Earlier this year, bankers urged the CMA to revisit its guidelines—ones that encourage Saudi issuers to allocate up to 30% of IPO shares to retail investors. Banks noted the policy risk of over-allocating to individuals when retail demand is weak. They voiced similar concerns regarding the guidance that encourages issuers to allocate large IPO portions to mutual funds.

Sources say investment bankers are worried about a large backlog of companies awaiting regulatory approval, with only a handful gaining approval each quarter-end.

Financial industry leaders are also frustrated by the six-month window for listings post-approval, which may force companies to push forward with IPOs in unfavorable market conditions or risk their approval lapsing and having to reapply.

According to sources, relations between capital market firms and regulators are also being tested, as the CMA is investigating some banks due to certain companies not meeting profit expectations in their first earnings reports after listing, leading to poor IPO performance.