#Saudi Stocks Climb on Hopes for More Market Liberalization - Bloomberg

Saudi Stocks Climb on Hopes for More Market Liberalization - Bloomberg

Saudi Arabian equities climbed after the kingdom opened up its stocks to all foreign investors, a step viewed as critical toward a full liberalization of the market as the Gulf nation looks to boost investment from abroad.

The Tadawul All Share Index jumped as much as 2.5% on Wednesday, the most since September, after the Saudi Capital Market Authority said it scrapped restrictions that stipulated foreigners must meet certain qualifications to participate in the local market. The removal allows non-residents to invest directly on the main exchange starting Feb. 1.

Financial firms including Saudi Tadawul Group, the owner of the stock exchange, and banks were among the day’s biggest gainers.

The CMA has said removing so-called Qualified Foreign Investor rules would be the first step to allowing investors from abroad to own a majority share of Saudi firms. Regulations currently limit foreign ownership to 49%.

“It stands to open the market to a wider group of investors, both retail and institutional,” said Salah Shamma, Franklin Templeton’s head of equity investment for the Middle East and North Africa, adding that the move had been expected by investors.

“It’s difficult to quantify the immediate impact of removal of QFI restrictions, but it’s a step in the right direction that should support the overall development of liquidity in the Saudi market,” he said.

Saudi Arabia’s need for foreign inflows has become more pronounced as subdued oil revenues and elevated spending on Crown Prince Mohammed bin Salman’s transformation plan translate into budget deficits that threaten to slow economic investments. Those factors helped drag Saudi equities to their worst annual performance since 2015 last year, with losses of nearly 13%.

Investors had raised concerns around a lack of fresh triggers to spark interest in the nation’s stocks, though have said a removal of foreign ownership limits could be a catalyst for an influx of foreign capital this year.

Scrapping Qualified Foreign Investor rules “is preparation for the removal of foreign ownership limits,” said Junaid Ansari, head of research and strategy at Kamco Investment Co. “It essentially makes Saudi Arabia a market accessible to all, including global small funds, regional and international family offices as well as international investors.”

JPMorgan Chase & Co., EFG Hermes and Franklin Templeton predict that the relaxation of foreign ownership limits would result in at least $10 billion of inflows, with banks including Al Rajhi Bank and Saudi National Bank the top beneficiaries. Shares in both banks jumped at least 3% on Wednesday.

With the latest move, focus now shifts to when and how much foreign ownership limits could be eased.

Bloomberg Intelligence Equity Strategist Andrew Martynov sees a likely change in the second half of the year that could drive fresh inflows to the Saudi market.

The CMA said late last year it hasn’t yet decided whether to eliminate the cap or lift it slowly but would undertake a review in 2026 to determine the best approach. It asserted at the time that Saudi Arabia was firmly on the path of fully opening its markets to foreigners. “This puts us closer,” Martynov said.

Lifting restrictions on foreign ownership also stands to boost the weight of Saudi equities in MSCI Inc. benchmarks. The kingdom’s $2.3 trillion equity market’s weight in the MSCI Emerging Markets Index currently stands at 2.9%.

“It’s not a matter of if, but a matter of when,” foreign ownership limits are removed, Franklin Templeton’s Shamma said, with a full removal potentially unlocking $8 to $10 billion of passive inflows.

“Eventually there’s a possibility that there will be less dominance of retail investors and a more prominent institutional investor base” in Saudi Arabia, Shamma said.

Compared to a few years ago, it’s a “different investment landscape.”

Why will #Saudi-#UAE trade ties remain resilient despite Yemen tensions? | Reuters

Why will Saudi-UAE trade ties remain resilient despite Yemen tensions? | Reuters

Turmoil in Yemen's south has exposed a major feud between Saudi Arabia and the United Arab Emirates, yet their $30 billion trade ties are proving remarkably resilient.

There is unlikely to be any repeat of the trade boycott that hit Qatar in 2017 during its standoff with Gulf states, because there is simply too much at stake for both Saudi and the UAE.

WHY IS THE SAUDI-UAE ROW NOT LIKELY TO HIT TRADE ?
Saudi Arabia and the UAE are so deeply enmeshed in trade, investment and logistics that analysts say a full-blown economic rift is unlikely.

In June 2017, Saudi Arabia, the UAE, Bahrain and Egypt severed ties with Qatar, accusing it of fomenting regional unrest, supporting terrorism and getting too close to Iran, all of which Doha denied. Trade and travel links were severed almost overnight.

But the Qatar blockade targeted a smaller economy with fewer interdependencies.

Gulf states have little appetite for new regional confrontations and are unlikely to risk an economic showdown, said Robert Mogielnicki, a Middle East political economist. Both Saudi Arabia and the UAE see foreign policy as a tool to support business, a mindset that’s helping keep economic ties intact, he added.

HOW CONNECTED ARE THEIR ECONOMIES?
Saudi-Emirati bilateral annual trade totalled around $30 billion at the end of 2023, according to Saudi data — up roughly 42% since 2020. The UAE was the kingdom’s fifth-largest destination for exports and its third-largest source of imports in 2024.

WHAT DOES TRADE LOOK LIKE?
Saudi-UAE commerce runs deep, spanning everything from refined petroleum and gold, to jewellery and re-exported consumer goods like electronics. Much of this trade flows through Dubai’s Jebel Ali port, a major hub for goods entering the Saudi market, even as Riyadh spends big to expand its own ports to capture more direct shipments.

Consumer markets are deeply intertwined: shoppers at Lulu hypermarkets, an Emirati chain ubiquitous in both countries, routinely toss Saudi-made staples into their trolleys: Almarai milk, Jomara dates, Alyoum chicken.

WHAT ABOUT INVESTMENTS?
Emirati investments in Saudi Arabia exceed $9.2 billion, while Saudi direct investments in the UAE are over $4.3 billion, according to Emirati data. More than 4,000 Saudi trademarks and dozens of commercial agencies operate in the Emirates, alongside joint ventures in logistics, retail, and hospitality.

ARE THE TWO GULF STATES ECONOMIC RIVALS?
Yes. The UAE has forged nearly 30 bilateral trade deals, opens new tab with countries, leapfrogging slow Gulf Cooperation Council negotiations that would have included Saudi Arabia.

Saudi Arabia has also taken steps seen as competitive, such as its 2021 directive requiring foreign firms to set up regional headquarters, opens new tab in Riyadh to qualify for government contracts - a move widely viewed as an effort to lure companies away from Dubai.

Competition between Saudi Arabia and the UAE is nothing new, but any move toward a boycott would undermine both countries' wider economic goals, said Alice Gower, a partner at London-based advisory firm Azure Strategy.

WHY DO THEIR TRADE TIES MATTER FOR THE MIDDLE EAST?
The Saudi-UAE economic relationship underpins much of the region’s trade and investment flows. Both countries act as a gateway for capital, goods, and services - Saudi Arabia as the largest Arab economy and the UAE as a major logistics and financial hub.

Regional stability is the top priority for both Gulf states, and any boycott would risk undermining confidence in their long-term economic masterplans and discourage investment and engagement in the region, Gower said.

Any prolonged strain between the two states would ripple across the Middle East.

#Saudi shares lead Gulf gains as kingdom to open market to all foreign investors | Reuters

Saudi shares lead Gulf gains as kingdom to open market to all foreign investors | Reuters

The Saudi stock market led Gulf equities higher on Wednesday after the kingdom said it will open its capital market to all categories of foreign investors from next month, while traders awaited U.S. labour-market data for clues on the Federal Reserve's policy path.

Saudi Arabia's benchmark stock index (.TASI), opens new tab rose as much as 2.5% and ended 1.6% higher, its biggest intraday gain in more than three months, with most constituents rising.

Finance, communication and consumer staples shares led advances, with heavyweight Al Rajhi Bank (1120.SE), opens new tab and Saudi National Bank (1180.SE), opens new tab rising 3.4% and 5.9%, respectively.

Exchange operator Saudi Tadawul Group (1111.SE), opens new tab climbed 5.2%, its sharpest rise since late September.

The rally followed a statement from the Capital Market Authority on Tuesday saying all foreign investors will be able to invest directly in the main market from February 1, after the regulator scrapped the "Qualified Foreign Investor" regime and removed rules that previously limited access.

The CMA said the measures aim to broaden the investor base, support inflows and improve liquidity, noting foreign investors' holdings exceeded 590 billion riyals ($157.3 billion) by end-Q3 2025, up from 498 billion riyals at end-2024.

"The announcement lifted sentiment as investors viewed it as a move to broaden participation, improve liquidity and support inflows," said Milad Azar, a market analyst at XTB MENA.

Investors remain focused on whether authorities will eventually lift the 49% foreign ownership cap, he added.

Dubai's benchmark stock index (.DFMGI), opens new tab rose 1.1% to 6,249, its highest since 2008, with the gains being broad based. Blue-chip developer Emaar Properties (EMAR.DU), opens new tab advanced 2.1% and Air Arabia (AIRA.DU), opens new tab surged 4.6%.

The Abu Dhabi benchmark index (.FTFADGI), opens new tab gained 0.5%, led by healthcare, real estate and financial stocks. Aldar Properties (ALDAR.AD), opens new tab added 1.5% and Abu Dhabi Islamic Bank (ADIB.AD), opens new tab rose 2.2%.

Meanwhile, the UAE's non-oil private sector maintained robust growth in December, although the pace of expansion moderated slightly from the previous month, a survey showed on Tuesday.

The Qatari benchmark index (.QSI), opens new tab gained 0.7%, with Qatar Islamic Bank (QISB.QA), opens new tab rising 1.6% and Qatar Aluminum Manufacturing (QAMC.QA), opens new tab adding 2.3%.

In Oman, the stock index (.MSX30), opens new tab climbed 1.2%, with Bank Muscat up 1.5% and Global Financial Investments Holding (GFIC.OM), opens new tab jumping 6.7% after state media reported plans to set up an international financial centre.

Investors were also watching U.S. data due later on Wednesday, including the JOLTS survey and ADP private payrolls, ahead of Friday's monthly jobs report. Markets have priced in two Fed rate cuts this year, but any surprises could shift expectations.

The Fed's stance matters for Gulf economies, where most currencies are pegged to the U.S. dollar, anchoring regional monetary policy.