New CMA leadership puts foreign caps and IPO reform back in focus

New leadership, old demands: Hopes for further market liberalization have revived since Mazen Al Sudairi, former Al Rajhi Capital research chief and cabinet adviser, took over as Capital Market Authority chairman this month, Bloomberg reports, citing people it says are familiar with the matter. The focus is a long-awaited easing of foreign ownership limits, but bankers and investors also want changes to a listing process they say has become too slow and rigid.

Why are hopes up? Al Sudairi replaced Mohammed ElKuwaiz, who had led the Capital Market Authority (CMA) for nearly a decade. His track record across some of the Kingdom’s largest banks, plus his government ties, has investors expecting he’ll lead a broader deregulation push.

The foreign cap is top of the list: Saudi Arabia’s 49% aggregate foreign ownership limit is the most obvious target. Morgan Stanley estimates raising it to 75% could draw around USD 4.3 bn in passive inflows, rising to USD 7.4 bn if the restriction is lifted entirely. Any change would need to come by late October to make MSCI’s November review. Neither the CMA nor Morgan Stanley responded to our request for comment.

What a higher cap actually changes: Saudi Arabia is the last major Gulf market with a restriction this tight, and easing it could pull in more international capital and deepen Tadawul liquidity. While a higher cap wouldn’t change the underlying value of Saudi-listed companies on its own, Hasnain Malik, head of Geopolitical Risk and Emerging Markets Equity Strategy at Tellimer, told us it would give large foreign investors room to build meaningful positions.

The IPO market needs attention too: Banks and investors also want changes beyond foreign ownership, including the CMA’s guidance nudging issuers to allocate as much as 30% of offerings to retail, the business news service notes. That can leave listings over-allocated to individuals when retail demand is soft. They also want faster approvals for companies waiting to list and more flexibility around the six-month window to complete a listing after sign-off. Those issues have become more pressing as the IPO pipeline slows.