Foreign cap hike could bring USD 4.3 bn to Tadawul

Inflows back in play: The prospect of raising foreign ownership limits in the stock market is back in focus following the appointment of Mazen Al Sudairi, (LinkedIn), as chairman of the Capital Market Authority’s board. The move is expected to raise the foreign ownership cap to 75% and could attract around USD 4.3 bn in additional inflows, with potential inflows rising to USD 7.4 bn if restrictions are fully removed, according to AlArabiya, citing Morgan Stanley’s report.

Tight window for MSCI: Any change would need to take effect before MSCI’s October price cutoff to be reflected in its November index review, according to Morgan Stanley. That makes the coming weeks critical for potential changes to Saudi stocks’ foreign inclusion factors and index weights.

Al Rajhi is the biggest beneficiary: Al Rajhi Bank could see the largest impact, with estimated additional inflows of USD 2.1-4.6 bn, depending on the regulatory scenario, according to the report.

ALSO- A higher cap could deepen market liquidity and give global investors greater room to build positions in Saudi-listed companies.

Opening step: Foreign investors currently face an aggregate ownership limit of 49% in most listed Saudi companies, excluding strategic investors. Raising the ceiling to 75% would mark a significant shift in the Kingdom’s market-opening efforts, while removing restrictions altogether would represent a more fundamental change to the structure of the Saudi equity market.

REMEMBER- Saudi equities face weaker liquidity and broader geopolitical uncertainty. TASI fell 1.95% in July to 10,590 points, while trading value dropped 20% y-o-y to SAR 86.1 bn. The CMA, meanwhile, is reportedly investigating the weak performance of recent IPOs and scrutinizing investment banks’ advice on pricing and allocations.