Shaimaa Hefzy

The Saudi market's main index fell by about 1.9% in Sunday's trading, as the decision to open the market to all foreign investors came into effect. This reaction was "less than expected," but it does not mean the decision is ineffective, as its impact is believed to be cumulative, according to an analyst who spoke to Zawya Arabic.

The Saudi Capital Market Authority announced last month that it would open the financial market to all categories of foreign investors and enable them to invest directly in it starting from February 1, 2026, which means that different categories of investors from all over the world can directly enter the financial market in all its categories.

"The market's performance in today's (Sunday's) session was characterized by volatility and relative weakness, which may seem at first glance to contradict the logic of positive news. This performance reflects the normal behavior of financial markets when faced with long-term strategic decisions," according to Rania Ghoul, senior financial markets analyst at XS.com, a global trading firm with offices and licenses in several countries.

Joel explained that in the case of strategic decisions, prices "need time to digest the decision and convert it into real cash flows," especially since the market had already partially anticipated the implementation of the decision during the past weeks, which means that part of the optimism was priced in in advance.

“With the absence of an immediate and significant influx of foreign liquidity in the first session, some local investors preferred to take profits or reduce risks, which was reflected in the general index,” according to Joule.

Quick background on the decision

The foreign investor needed to meet conditions that qualified him to invest in shares listed on the main market as a qualified foreign investor, such as: being a legal entity, and the value of assets owned, managed, or held by him or his group when applying to open an investment account amounting to about 1.9 billion riyals ($506.7 million).

The amendments, which came into effect on Sunday, have eliminated the concept of a qualified foreign investor in the main market, allowing all categories of foreign investors to enter the market without having to meet qualification requirements.

The amendments also allow foreign investors to invest directly in shares listed on the main market instead of swap agreements that were used to enable non-resident foreign investors to obtain only the economic benefits, i.e., dividends from listed securities.

Cumulative effect

The analyst pointed out that although opening the market to all categories of foreign investors without strict restrictions is a structurally very important step, as it expands the base of potential investors and gives the market a greater opportunity to attract global capital, the real impact of this decision will be cumulative rather than instantaneous.

"The current phase is more of a market testing phase than a rush phase. In the medium term, as market depth improves and foreign ownership gradually increases, we may see a repricing of some leading stocks, but this is conditional on the availability of a supportive macroeconomic environment," according to Joel .

According to the analyst, amid the uncertainty surrounding US policies, the Saudi market, whose main index fell by 12.84% in 2025, faces both psychological and practical pressure related to the continued low oil prices compared to previous years. This pressure is particularly affecting energy stocks and sectors linked to government spending .

Low oil prices limit the index's ability to achieve a strong and rapid rise, because any pressure on it is reflected in growth and profit expectations, especially for the aforementioned sectors, according to Joule.

Joule added: "Therefore, any sustained improvement in oil prices would be an important catalyst for a change in the direction of the TASI, while continued pressure would keep the market in relatively narrow fluctuation ranges."

Joule predicted that the index would continue to fluctuate and build price bases, with the market remaining sensitive to external news in the short term. In the medium term, however, a supportive economic environment could create a more sustainable upward path for the market, led by blue-chip stocks and sectors that are attractive to foreign investors and have higher dividend payouts .

"My assessment is that the TASI index has the technical and economic strengths to allow it to reverse its direction during the year, but not necessarily through a sharp and rapid rise. The most likely scenario is a gradual movement, depending on improved liquidity, gradual foreign entry, and relatively stable oil prices . "

(Prepared by: Shaimaa Hefzy, for contact: zawya.arabic@lseg.com)

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